Many states use container redemption programs to encourage reuse of glass bottles and other recyclable containers. Suppose a state has a current redemption program that imposes a 10-cent per container fee, and then the state increases the fee to 15 cents per container. What is the expected impact of this change on the optimal quantity of unredeemed (scrapped) containers?

A) Optimal quantity increases.
B) Optimal quantity decreases.
C) Optimal quantity remains unchanged.
D) We cannot determine the outcome of this policy change without having more information.

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Jasdeep Singh · Accepted Answer

Final Answer : B, Explanation :  The increase in the fee would incentivize more people to return their containers for redemption, leading to a decrease in the quantity of unredeemed containers. This is because the cost of not redeeming the containers (losing the 15-cent fee) would increase, making it more attractive for consumers to return their containers.

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