Environmentalists in Tennessee brought suit against the Champion Paper Company of North Carolina for polluting the Pigeon River, which flows from North Carolina into eastern Tennessee. Tennessee claimed that the coffee-colored water smelled bad and would not support fishing or swimming. Environmentalists requested that the river be restored to its pristine state, or the water quality it had before the coming of industry. The Environmental Protection Agency (EPA) heard the suit and applied an efficiency standard. In other words, the EPA set limits on how much pollution the paper company could release (though this number was not zero). Adjust the following graph to indicate the negative externality. PRICE (Dollars per sheet) 2 1 10 9 Supply Demand 8 0 0 1 2 Demand 7 9 10 5 3 4 QUANTITY (Sheets of paper) Supply When the EPA imposes standards on the paper company, the quantity of paper produced will company will . The new equilibrium price is $ , and the price of paper from this per sheet of paper, whereas the new equilibrium quantity is sheets of paper.

Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter14: Environmental Economics
Section: Chapter Questions
Problem 6SQP
Question
Environmentalists in Tennessee brought suit against the Champion Paper Company of North Carolina for polluting the Pigeon River,
which flows from North Carolina into eastern Tennessee. Tennessee claimed that the coffee-colored water smelled bad and would not
support fishing or swimming. Environmentalists requested that the river be restored to its pristine state, or the water quality it had
before the coming of industry. The Environmental Protection Agency (EPA) heard the suit and applied an efficiency standard. In other
words, the EPA set limits on how much pollution the paper company could release (though this number was not zero).
Adjust the following graph to indicate the negative externality.
PRICE (Dollars per sheet)
2
1
10
9
Supply
Demand
8
0
0 1 2
Demand
7
9
10
5
3 4
QUANTITY (Sheets of paper)
Supply
When the EPA imposes standards on the paper company, the quantity of paper produced will
company will
. The new equilibrium price is $
, and the price of paper from this
per sheet of paper, whereas the new equilibrium quantity is
sheets of paper.
Transcribed Image Text:Environmentalists in Tennessee brought suit against the Champion Paper Company of North Carolina for polluting the Pigeon River, which flows from North Carolina into eastern Tennessee. Tennessee claimed that the coffee-colored water smelled bad and would not support fishing or swimming. Environmentalists requested that the river be restored to its pristine state, or the water quality it had before the coming of industry. The Environmental Protection Agency (EPA) heard the suit and applied an efficiency standard. In other words, the EPA set limits on how much pollution the paper company could release (though this number was not zero). Adjust the following graph to indicate the negative externality. PRICE (Dollars per sheet) 2 1 10 9 Supply Demand 8 0 0 1 2 Demand 7 9 10 5 3 4 QUANTITY (Sheets of paper) Supply When the EPA imposes standards on the paper company, the quantity of paper produced will company will . The new equilibrium price is $ , and the price of paper from this per sheet of paper, whereas the new equilibrium quantity is sheets of paper.
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