Question

There has been much discussion in the news about the production and use of paper straws. Describe the market for plastic straws. Is there an externality associated with this market? If there is an externality, what type exists? What will this externality do to the market for plastic straws? Be sure to clearly describe the equilibrium price and quantity for the market in both cases (in presence and absence of the externality).

Answer 1

There has been much discussion in the news about the production and use of paper straws. Describe the market for plastic straws.

There is a market for paper straws. Example- Starbucks has announced to scrap plastic straws completely by 2020. Many other companies are also thinking to stop usage. Paper straws being substitute to them certainly have a market.

Is there an externality associated with this market?

Yes, there is an externality associated with this. Negative externality of production. Many trees or plants can be cut. If cellulose enters in a body then it can cause negative externality of consumption also. However, the plastic usage will go down and this will create positive externality. It is important to measure exact effects.

If there is an externality, what type exists?

As explained above, both consumption negative and production negative externalities exist. However, it may lead to positive production externality.

What will this externality do to the market for plastic straws? Be sure to clearly describe the equilibrium price and quantity for the market in both cases (in presence and absence of the externality).

This will certainly decrease demand for plastic straws and its demand will go down and also its price. The demand for paper straws will go up and also its price. Negative externality caused by plastic straws will certainly reduce.