Companies Producing Toilet Paper Bleach the Paper to Make It

Multiple Choice

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 5-9 illustrates the situation in the toilet paper market.
-Refer to Figure 5-9. Let's suppose the government imposes a tax of $50 per unit of toilet paper to bring about the efficient level of production. What happens to the market price of toilet paper?

A) It rises by $50 per unit.
B) It rises by more than $50 per unit.
C) It rises by less than $50 per unit.
D) It remains the same because the tax is imposed on producers who create the externality.