1. Assume market demand for wood pulp is: P = 1000 - 0.1Q, and the private-cost supply is: P = 100 + 0.1Q, where P is price of pulp per tonne and Q is tonnes of wood pulp. Assume there marginal external cost of producing wood pulp is: $0.05 per tonne of pulp. Answer the following questions analytically and illustrate them on a graph. Make sure your show and explain all your work.

a. Solve for Market based equilibrium P, Q, and total gross gains (not considering the external cost) from trade.

b. Solve for total external cost under (a) above.

c. Solve for the true or net social gains from trade under (a) above.

d. Solve for the social based equilibrium P, Q, and the resulting total gains from trade. Compare with ( c) above