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The inverse demand for newsprint can be described by P=200−QP=200−Q

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The inverse demand for newsprint can be described by P=200−QP=200−Q. The private marginal cost of producing newsprint is MCP=140+QMCP=140+Q. The total external cost (from water-borne pollution is a simple linear function of the quantity of newsprint (and its co-products) produced, so the marginal external cost is MCE=QMCE=Q. What is the amount of a specific tax (tax per unit of newsprint produced) will induce production of the socially-optimal quantity of newsprint?

A. Optimal Tax per unit of newsprint = $20

B. Optimal Tax per unit of newsprint = $15

C. Optimal Tax per unit of newsprint = $12

D. Optimal Tax per unit of newsprint = $10

E. Optimal Tax per unit of newsprint is different from any of the above