Question: Could you help with the following exercise please? Question 5: Refuse Collection (30 points) Consider the example of household refuse collection in Minneapolis. Assume that

Could you help with the following exercise please?

Could you help with the following exercise please? Question 5: Refuse Collection

Question 5: Refuse Collection (30 points) Consider the example of household refuse collection in Minneapolis. Assume that the marginal social cost (MSC) of collecting and disposing of it is $0.15/lb. Suppose that in 2011 there was a fee of $0.05/lb being charged and the quantity of refuse collected was 2.5lb/p/d. Suppose that in 2012 the fee was $0.1/lb and the quantity of refuse collected was 2.00lb/p/d. Now, the government is planning to increase the fee in 2014 to $0.12/lb. (a) (10 pts) Assuming a linear demand function, calculate the change in total surplus from an increase in the fee from $0.10/lb to $0.12/lb. (b) (10 pts) Assuming a constant elasticity demand function, calculate the change in total surplus from an increase in the fee from $0.10/lb to $0.12/lb. (c) (5 pts) Assuming a linear demand function, what is the optimal fee that would maxi- mize social surplus? (d) (5 pts) Does your answer in (c) changes if we assume a constant elasticity demand function? Why

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