1. Consider a market with demand Q=50-2P and supply Q=3P-5. Suppose that there is a negative externality of $5/unit, and no income effects. a) Find the efficient quantity and the deadweight loss. b) How much money would the government raise from a Pigouvian tax that leads to the efficient quantity? c) If the government instead auctions off the efficient quantity of permits to the highest bidders on the supply side, what would be the price of permits? What if the permits were auctioned off to the demand side? d) A lobbyist asks you, a member of the Cabinet, to give the permits to his clients for free instead of auctioning them off "in order to avoid hurting the economy." Should you follow his advice? e) Instead of tradable permits, the Prime Minister wants to regulate the industry through non-tradable quotas. Explain why this would likely cause a deadweight loss within the market even if the quotas for each firm exactly add up to the efficient quantity