Figure 4-21
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 4-21 illustrates the situation in the toilet paper market.
-Refer to Figure 4-21.An efficient way to get the firm to produce the socially optimal output level is

Question

Figure 4-21
  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 4-21 illustrates the situation in the toilet paper market.
-Refer to Figure 4-21.An efficient way to get the firm to produce the socially optimal output level is

Quizplus · Accepted Answer

Imposing a tax on the toilet paper industry would make them bear the external costs of production, thus incentivizing them to reduce their pollution levels and produce the socially optimal output level. The tax would act as a deterrent to the industry from discharging bleach into rivers and lakes, which causes substantial environmental damage. By internalizing the external costs, the industry would be incentivized to find less harmful alternatives to bleach or invest in technology that reduces pollution levels. Thus, a tax would ensure that the industry produces the socially optimal output level while also safeguarding the environment.

Figure 4-21 Companies Producing Toilet Paper Bleach the Paper to Paper