Below figure illustrates the market of rare metals in a country when it begins to trade

with other countries in the international market. As you can see, because the country's

domestic equilibrium price is lower than the international price, it will export rare

metals to other countries at the (higher) international price, resulting in a gain from

trade. However, producing rare metals produces pollution that harms local workers.

Discuss: when there is a negative externality in producing rare metals, will the country

still benefit from opening to trade?

Price Quantity Demanded by Domestic Buyers World Price Loss of Consumer Surplus; Domestic Price Gain of Producer Surplus Quantity Produced by Without Trade Domestic Suppliers Producer Surplus Gain from Exporting Quantity