Figure 15.9 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 15.9 illustrates the situation in the toilet paper market.
-Refer to Figure 15.9.The private profit-maximising output level is

Question

Figure 15.9  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 15.9 illustrates the situation in the toilet paper market.
-Refer to Figure 15.9.The private profit-maximising output level is

Quizplus · Accepted Answer

The private profit-maximising output level is where the marginal cost (MC) curve intersects the marginal revenue (MR) curve. In the graph, this occurs at point E where the output level is Q₃. This output level generates the highest profit for the firm, but it also results in environmental damage due to the discharge of bleach into rivers and lakes. To address this negative externality, the government could impose a tax on the producers of toilet paper that reflects the cost of the environmental damage they cause. This tax would shift the supply curve upwards and result in a new equilibrium with a lower output level and higher price, thus reducing the environmental impact.

Figure 159 Companies Producing Toilet Paper Bleach the Paper to to Make