In Figure 17.3, the government may optimally regulate the paper market by taxing output. Given that the output tax remains constant, what are the welfare implications of a technological change that drives down the private marginal cost of production?
Figure 17.3: Taxes to Control Pollution

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450 MCS = MCP + t(Q) МCР + т MCP Pg = 282 T = 84 MCP = 198 мO MC9 = 84 Demand Og= 84 225 Q, Tons of paper per day Price of paper, p, $ per ton