Question: The market demand function for notebook paper is given by the equation, P = 95 - 1.5q. Notebook paper is produced in a competitive market

The market demand function for notebook paper is given by the equation, P = 95 - 1.5q. Notebook paper is produced in a competitive market where all producers have marginal costs of production given by the equation, mc = 10 + 0.75q. P is the price of notebook paper per ream and Q is the quantity of reams demanded and/or supplied).

1. Find the equilibrium price and quantity of notebook paper

2. Suppose that the production process of notebook paper leaches chemicals into local bodies of water, harming the ecosystem (represented by the cost equation given in the problem). Producers do not pay for this harm. What would you expect to happen to the equilibrium quantity and price of notebook paper relative to your answer in (b)? What about the size of consumer surplus and producer surplus?

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