SARS virus has caused huge negative impacts on population health and the economy. The general public and the government are working hand in hand to curb the spread of virus. Various measures were introduced to curb the spread of this deadly virus like use of face masks, gloves, face shields, personal protective equipment, sanitizers and vaccines. Till date in US, 56.5% of its population is fully vaccinated, indicating that these people are not active carriers of the virus.

Even though these measures helped to curb the spread of virus, they have also caused harmful impacts on the environment as there was increased use of plastic and laminates in the form of face mask, PPE, which are then disposed in waste dumps and water bodies around the world. The government spends $20 million per year to clean environmental resources as a result of such actions.

(a) (14 marks) How can we understand the harmful impacts on the environment using the standard economic model? How can the government help in reducing the extent of the harm?

(b) (16 marks) According to Coase theorem, what could be other ways to reduce the harmful impacts of plastic and laminates on the environment? Do you agree with Coase’s solution to reduce the harmful impacts on the environment?