2. (25 points) The E.U imports hardwood from other countries. The production of hardwood outside of the E.U. produces a number of negative externalities including soil and water degradation and carbon. Assume no production or consumption externalities within the E.U. (Assume we care about externalities no matter where they occur in the world.) A. (10 points) Show the pre-trade (autarchy) equilibrium as well as the world price and the quantities produced, consumed, and exported after trade. (Assume that that the E.U. is a "small" country in the world timber market.) B. (10 points) Is it more efficient for the E.U. to implement: 1) an import tariff on timber; 2) A tax on the purchase of timber; 3) neither. C. (5 points) Should the policy you recommended in (b) be regarded as a trade barrier? (There is no correct answer on this one. Make a good argument.)