Consider the example of domestic pollution shown in figure 13.4. Suppose that the marginal external cost of

Question:

Consider the example of domestic pollution shown in figure 13.4. Suppose that the marginal external cost of the pollution is $0.05 per ream produced (instead of $0.30).
a. With this different MEC, does free trade make the country better off or worse off?
b. To gain the most from trade, should the country export or import paper? How much?