Assume that China and France each have 1,000 production units. With one production, China can produce either 10 containers of toys or 7 cases of wine. France can produce either 2 containers of toys or 7 cases of wine. Assume complete specialization where China produces 10000 containers of toys and France produces 7000 cases of wine. Both countries agree to trade at China’s domestic price where 10 containers of toys equals 7 cases of wine. Assume France exports 1400 cases of wine to China.

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Suppose the price of a complement to lcd televisions rises. what effect will this have on the market equilibrium for lcd tvs?

4. suppose that pollution in a neighborhood comes from two factories, with marginal benefit curves given by mb1 = 12 – p1 and mb2 = 8 – p2. the level of pollution in the neighborhood is given by p = p1 + p2. the government wants to limit pollution by instituting a pollution-rights market. the government’s desired level of p is 10, so it prints 10 pollution rights and offers them for sale to the firms. a)find the equilibrium selling price of a pollution right, as well as the allocation of rights (and hence pollution levels) across the two factories. b)repeat part (a) for the case where the government’s desired level of pollution equals 14. c)comment on the usefulness of a pollution rights market in achieving efficient levels of pollution abatement.