1.Market supply and demand in a certain market are given by the following equations:

Supply:Q = 4P - 60

Demand: Q = 300 - 5P

Suppose that the international price for this good is $50. Without government intervention, would this country import from or export to the rest of the world? How many units will be imported or exported? How much are the gains from trade?

2. Consider a market defined as follows:

Demand: Q = 400 - P

Supply: Q = 2P - 200

Additionally, a negative externality of $75 per unit is associated with the traded good.

Is the free market trading too many or too few units to maximize social benefit? Should the government tax or subsidize firms in order to achieve efficiency? How large should be such tax or subsidy?

3.Consider a market defined as follows:

Demand: Q = 400 - P

Supply: Q = 2P - 200

Additionally, a negative externality of $75 per unit is associated with the traded good.

How many units should be traded in this market to maximize benefit to society?