Figure 11.11 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 11.11 illustrates the situation in the toilet paper market.
-Refer to Figure 11.11.Suppose the government imposes a tax of $60 per ton of toilet paper to bring about the efficient level of production.What happens to the market price of toilet paper?

Question

Figure 11.11  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 11.11 illustrates the situation in the toilet paper market.
-Refer to Figure 11.11.Suppose the government imposes a tax of $60 per ton of toilet paper to bring about the efficient level of production.What happens to the market price of toilet paper?

Quizplus · Accepted Answer

The tax would increase the cost of production for toilet paper, leading to a decrease in supply. As a result, the equilibrium quantity would decrease, but the price would not increase by the full amount of the tax. Therefore, the market price of toilet paper would rise by less than $60.

Figure 1111 Companies Producing Toilet Paper Bleach the Paper to to Make