country's production marginal cost before 2006. In 2006, China introduced a government plan to guide the development of its ship-building industry. After 2006, the number of Chinese shipyards increased dramatically. The same happened with China's ship production rate: its market share jumped to 50%, while Europe's dropped to 5% and Japan's to 45%. World Trade Organization (WTO) agreements prohibit government industrial subsidies. Thus, complaints by WTO members led to an inves- tigation to find out if the Chinese government subsidized shipbuilding and if so by how much. 2. Suppose that a production subsidy of z implies a decrease in China's marginal cost from c to c - z. Use the pre and post 2006 data to estimate z. 3. Compute consumer surplus and profits by country. Who was hurt and who gained from China's production subsidies