Answer to Question #146025 in Macroeconomics for Marcia

Question

Describe in detail the externality that arises from a plastic bag

Answer 1

Initially, there were attempts to create a market in property rights to control the impact of plastic bags on the environment; retailers created recycling programs to take back the bags and some even had a deposit refund associated with their return, but the reform didn’t take. Consumers just don’t recycle their plastic bags. Without the market of plastic bag recycling, plastic bags became a common good that was over-exploited by the consumer and the supplier without proper disposal. Plastic bags became a market failure.