Assume x hectares (ha) of tropical rainforest is being converted into farmland.

The conversion cost is represented by the function 2 × 2 + 2x. Also assume that the market price of farmland is ¥p/ha, and the demand function for farmland is x = 7 − 0. 5p.

a. Determine the agricultural land conversion area and market price at market equilibrium.

b. Assume damages amounting to ¥6x are incurred when x ha of tropical forest are lost to agricultural conversion. Determine the socially optimal farmland conversion area that includes the impact of tropical rainforest losses under such circumstances.

c. Calculate the deadweight loss.