Figure 4-11 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 4-11 illustrates the situation in the toilet paper market.
-Refer to Figure 4-11.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?

Question

Figure 4-11  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 4-11 illustrates the situation in the toilet paper market.
-Refer to Figure 4-11.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?

Quizplus · Accepted Answer

When a tax of $50 is imposed, the costs for the producers increase by $50. Due to this increase in production costs, the supply curve shifts leftward. This leads to a decrease in the quantity demanded of toilet paper, and the market price of toilet paper will increase but by less than $50. This is because the decrease in quantity demanded will offset some of the increase in production costs.

Figure 4-11 Companies Producing Toilet Paper Bleach the Paper