The regional market for paper in a particular country is given by demand and supply equations, P = -0.0005Qd + 80 and P = 0.0005Qs - 20. P is the price per 100-pound "lot" and Q represents 100-pound lots.

a)What is the equilibrium price and quantity in this paper market?

b)Unfortunately, paper production also produces pollution and paper mills sometimes dump the effluent into streams and rivers. The marginal external cost of the paper production is estimated to be, MEC = 0.0006Qs. What is the socially efficient price and paper output?

c)Explain why the answers in part a and b differ.

d)What public policy solution could be used in this situation (be specific).