According to the model of a deposit-refund system: a. the deposit paid captures the marginal...

Question:

According to the model of a deposit-refund system:

a. the deposit paid captures the marginal social cost (MSC) of improper waste disposal.

b. the refund represents the marginal private benefit (MPB) of improper waste disposal.

c. if the deposit is set equal to the marginal external cost (MEC) at the competitive equilibrium, the efficient equilibrium outcome is achieved.

d. the deposit converts the excess amount of improper waste disposal to proper waste disposal.

e. none of the above

Marginal Social Cost:

The total cost impact to the society incurred by producing one another unit of product for meeting the marginal benefit force of the economy is called marginal social cost.

Answer and Explanation:

The correct option is d) the deposit converts the excess amount of improper waste disposal to proper waste disposal

It is correct because the deposit-refund system incentivizes consumers to properly dispose of their products and addresses the market externalities. It reduces illegal dumping and cost evasion.

Reason for incorrect options:-

Option a) is incorrect because it captures the product's surcharge and not the marginal social cost.

Option b) is incorrect because it represents the advance deposit fee and not the marginal private cost.

Option c) is incorrect because carbon tax needs to be set up instead of a deposit-refund fee to achieve efficient equilibrium.