Macroeconomics 8th Edition by David Colander

Exercise 5

In the 1990s, Germany passed a law requiring businesses to take back and recycle all forms of packaging. A large group of businesses formed a company to collect and recycle these packages. Its costs are 4.5 cents per pound for glass, 9.5 cents per pound for paper, and 74 cents per pound for plastic. This accounts for a recycling cost of about $100 per ton for glass and $2,000 per ton for plastic; the average recycling cost of paper is $500 per ton. A developing country has offered to create a giant landfill and accept Germany's waste at a cost of $400 per ton, which includes $50 per ton sorting and transport costs and a $350-per-ton fee to be paid to the developing country.
a. Should Germany accept this proposal?
b. Will the proposal benefit the developing country?