The market for a particular chemical, called Negext is described by the following equations:

Qd = 100 -5P

Qs =5P

a.Find the equilibrium price and quantity. Compute consumer surplus and producer surplus at the market equilibrium.

b.For each unit of Negext produced, 5 units of pollution are emitted, and each unit of pollution imposes a cost on society of $1. Compute the total cost of pollution when the market is in equilibrium.

c.Suppose that the government restricts emissions to 100 units of pollution. Graph the market under this constraint. Find the new equilibrium price and quantity and show them on your graph.

d.Suppose that instead of restricting pollution, the government imposes a tax on producers equal to $5 for each unit of chemical produced. Calculate the new equilibrium price and quantity and the cost of pollution.

e.Which of the two policies would you recommend? Why?