Figure 5-9 Companies Producing Toilet Paper Bleach the Paper to Make It

Multiple Choice

Figure 5-9

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 5-9 illustrates the situation in the toilet paper market.
-Refer to Figure 5-9.An efficient way to get the firm to produce the socially optimal output level is

A) for government to set a quota on the quantity of toilet paper that the toilet paper industry can produce.
B) to impose a tax to make the industry bear the external costs it creates.
C) to grant a subsidy to enable the industry to internalize the external costs of production.
D) to assign property rights to the firms in the industry.