Figure 5.5

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.The efficient output is

Question

Figure 5.5
  
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.The efficient output is

Quizplus · Accepted Answer

The efficient output is where marginal social cost (MSC) equals marginal social benefit (MSB). In the graph, this occurs at output level Q2. Therefore, Choice B is the best choice as it maximizes social welfare by reducing the negative externalities of bleach discharge into rivers and lakes.

Figure 5.5 Companies Producing Toilet Paper Bleach the Paper to Make It