Consider the market for recycling bags

The demand and social marginal benefit in the merket for recycling bags are summarized by the following equations.

• Demand: P = 500 - 0.8.Q

• Social Marginal Benifit: MB = 900 - 0.5.Q

Now, we get the equation for External Benifit (E) from the difference between Social Marginal Benifit and Demand curve. Hence, external benifit for an additional bag is

E = MB - P

Hence, when quantity is 360 bags, we get,

Q = 360

Hence,

P = 500 - 0.8.Q = 500 - 0.8×360

or, P = $212

And, MB = 900 - 0.5.Q = 900 - 0.5×360

or, MB = $720

Hence, external benefit at quantity 360 for an additional bag is

E = MB - P = $720 - $212

or, E = $508

The external benefit at quantity 360 is [$508] dollar(s) for an additional bag.