A paper mill discharges chemicals into a river which affect the shores of a downstream resort area. The private cost, social cost, and marginal benefit associated with the production of paper are given by the following equations:
MCP = 5 + Q,
MCS = 10 + 2Q
MB = 35 - 0.5Q.
What level of emissions tax (dollars per unit of output produced) would provide the paper mill with the incentive to produce at the allocatively efficient level of output?
◦ $15
◦ $5
◦ $20
◦ $10
◦ $25