The market for a particular chemical, called Negext, isdescribed by the following equations.
Demand is given by:
QD = 100 -5P
Supply is given by:
QS = 5P
where Q is measured as units ofNegext and P is price in dollars per unit.
a. Find the equilibrium price andquantity. Compute consumer surplus, producer surplus, and totalsurplus in the market equilibrium.
b. For each unit of Negext produced,4 units of pollution are emitted, and each unit of pollutionimposes a cost on society of $1. Compute the total cost ofpollution when the market for Negext is in equilibrium. What istotal surplus from the market after taking into account the cost ofpollution?
c. Would banning Negext increase ordecrease welfare? Why?