1. Consider a small, isolated island with a coconut oil industry and three villages. Coconut oil can be produced at a constant per-unit cost of 50 pesos per liter. All the oil is sold in the villages, and due to the close proximity of the villages to each other, the retail price in all three villages must be the same. The three villages' demand for coconut oil is given by the following indirect demand functions (where Q,- is the amount of coconut oil (in liters) consumed by village 2' and P,- is the price (in pesos per liter) that the people living in village i are willing to pay for the marginal liter): P1(Q1) = 210 $621; P2(Q2) = 400 QQ; P3(Q3) = 600 %Q3. The production of coconut oil creates environmental damage, mostly via deforestation associated with growing coconut trees, but also via water and air pollution from chem- icals used in the oil extraction industry. The marginal damage due to deforestation is MD F(Q) = 10 + $62 (pesos per liter of coconut oil produced), whereas the marginal damage due to pollution is MD p(Q) = 10 (pesos per liter of coconut oil produced). (g) Suppose the government wants to implement the socially optimal level by introducing a per-unit tax on coconut oil production. Determine ta, the level of tax (in pesos per liter) that achieves this goal