Problem Set One SolutionsChapter 13. Residents of your city are charged a fixed weekly fee of $6 for garbage collection. They areallowed to put out as many cans as they wish. The average household disposes of three cans ofgarbage per week under this plan. Now suppose that your city changes to a “tag” system. Eachcan of refuse to be collected must have a tag affixed to it. The tags cost $2 each and are notreusable. What effect do you think the introduction of the tag system will have on the totalquantity of garbage collected in your city? Explain briefly.Answer: In the first case, the cost is $6/week no matter how many cans you put out, so the cost ofdisposing of an extra can of garbage is $0. Under the tag system, the cost of putting out an extracan is $2, regardless of the number of the cans. Since the relevant costs are higher under the tagsystem, we would expect this system to reduce the number of cans collected.
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