Question

How to Dispose of Mercury-Filled Light Bulbs Price and cost (dollars per bulb) 5.00 Compact fluorescent light bulbs (CFLs) contain mercury and 1,150 kilograms of this toxic substance end up in Canadian landfills each year. A new federal law provides guidance on how to dispose of CFLs in an environmentally responsible way. MSC 4.00 Source: CBC News, June 26, 2017 3.00- What is the external cost that arises from CFLs? Explain why the market for CFLs is inefficient. How could the market for CFLs be made to operate efficiently? 2.00- S=MC The external cost that arises from CFLs is 1.00- 0.00+ 0 DEMSB 1 2 3 4. 5 6 7 A. a longer bulb life than was previously available B. mercury deposited into landfill sites C. a new law that regulates disposal of CFLs D. the change in the electric bill that arises from using CFLs Quantity (millions of bulbs per year) >>> Draw only the objects specified in the question.

Answer 1

It has been stated that CFLs contain mercury which is a toxic substance and each year considerable amount of mercury gets deposited at landfills as CFLs are discarded after thier life use.

Such discarded mercury creates environmental problems and imposes a cost on the society in terms of adverse helath impact.

Thus,

The external cost that arises from CFLs is mercury deposited into landfill sites.

Hence, the correct answer is the option (B).

The market equilibrium is attained at the intersection of the marginal social benefit curve and the marginal cost curve.

The efficient quantity is attained at the intersection of the marginal social benefit curve and the marginal social cost curve.

Following is the required figure -

Price and cost (dollars per bulb) 5.00 MSC 4.00- 3.00- 2 2.00 DWL S=MC 1.00 0.00 0 1 D=MSR 2 3 4 5 6 Quantity (millions of bulbs per year) 7

It can be seen that efficient quantity is less than the market quantity. This reflects that external cost imposed by the CFLs is not internalized.

Thus,

The market for CFLs is inefficient because consumers do not consider the external cost when determining their use of CFLs.

Hence, the correct answer is the option (B).