Companies producing toilet paper bleach the paper to make it white. The bleach i

Question

Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 5-5 illustrates the situation in the toilet paper market. Refer to Figure 5-5. Let's suppose the government imposes a tax of $50 per ton of toilet paper to bring about the efficient level of production. What happens to the market price of toilet paper? It rises by less than $50. It rises by more than $50. It rises by $50. It remains the same because the tax is imposed on producers who create the externality. Refer to Figure 5-5. Suppose the government wants to use a Pigovian tax to bring about the efficient level of production. What should the value of the tax be? P_1 per ton of output (P_1 - P_0) per ton of output (P_2 - P_1) per ton of output (P_2 - P_0) per ton of output Refer to Figure 5-5. An efficient way to get the firm to produce the socially optimal output level is to assign property rights t

Explanation / Answer

45) Answer is C) (P2 - P1) per ton of output because tax of this on the polluting good has the effect of restricting its output to the social optimum, in which case the state will have to treat pollution.

46) Answer is A) to assign property rights to the firms in the industry. Property rights does not harm to the firm while lead to efficient outcome in the economy.

47) Answer is C) Q3 because at this output, marginal benefit = marginal private cost.

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