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Many cities tax or ban plastic grocery bags. The rationale for these taxes and bans is an externalities argument: plastic bags are an eyesore, take
Many cities tax or ban plastic grocery bags. The rationale for these taxes and bans is an externalities argument: plastic bags are an eyesore, take up space in landfills, and damage fish, birds, and other wildlife. In a diagram, show the efficient number of plastic bags and the equilibrium number of plastic bags in the absence of any government policies. 1.) Using the line drawing tool, draw the supply curve. Properly label your curve. 2.) Using the line drawing tool, draw the demand curve. Properly label your curve. 3.) Using the point drawing tool, indicate the equilibrium in the private market. Label your point 'E4" This outcome Ijl socially efficient. Now assume consumers are forced to pay a tax on each plastic bag used equal to the negative externality. 4.) Using the line drawing tool, draw either a new supply curve or demand curve to account for the plastic bag tax. Properly label your curve. 5.) Using the point drawing tool, indicate the new equilibrium. Label your point 'Ey. This outcome Ijl socially efficient. Carefully follow the instructions above and only draw the required objects. Price of plastic bags (cents) 30 28 26 24 22 20 18 16 14 12 o N B O @ 0 2 4 6 8 1012 14 16 18 20 22 24 26 28 30 Quantity of plastic bags (hundreds)
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