Many municipalities are concerned about the environmental impact of plastic bags, which often end up as litter, clogging drains and hanging from tree branches. A town is considering whether to impose a tax on plastic bags to be collected at the store, or a per person quota. Cindy and Carl are two aver-age citizens who both use plastic bags when they go grocery shopping.
a. Under the quota, what is the marginal benefit of the last bag for each?
b. How many bags will each shopper use under the tax? What is the marginal benefit of the last bag for each? What is the marginal benefit of the last bag after subtracting the tax?
c. Would you recommend that the town adopt a plastic-bag quota or tax?