1. Consider two popular nightclubs in Pawnee, called the WLounge and the Bulge. Unfortunately. both clubs cause noise pollution. Fortunately, there is a technology that the clubs can adopt to help reduce the noise m- umound absorbing panels]. The cost of adopting this technology is differ- gmfor each club. For the Whole, Lounge, the marginal cost of reducing noise pollution is 10. On the other hand, for Bulge, this cost is 5. In essence the marginal cost of noise reduction for both firms is constant. Both night- clubs produce 15 units of noise pollution. Suppose that the social marginal benefit of noise reduction is described by the following linear function 30'(a+39 where 5% and Q are the total reduction of the Snakehole Lounge and the Bulge respectively. a. Please use the model of pollution reduction to draw a graph Mm- mgthe social marginal benet, the social marginal cost, and the private marginal benefit of noise reduction for the nightclubs. b. What is the socially optimal amount of reduction for the WLounge and the Bulge? Leslie W at the Parks and Recreation Department of Pawnee is m- gringwhether to impose taxes or quantity restrictions to curb the noise pol- lution of their environment. The taxes, (5%, rs! , would be Pigouvian taxes on the marginal unit of noise that each club emits. The quantity restriction, (z-S, [BL would be a lower bound on the amount of noise reduction for each club. For example, the WLounge must reduce noise pollution by at least a}, c. What are the optimal taxes 35% and 1'3 to achieve the social optimum? d. What are the optimal quantity restrictions 5:3 and 'z'g to achieve the social optimum? e. Do optimal Pigouvian policies achieve the same noise reduction as the optimal quantity restrictions in this setting? Please explain why in one sentence. Suppose Leslie mpgknows that one of the clubs has cost 10 and the other has 5, but she does not know which club has the high cost and which one has the low cost. f. Propose a Pigouvian tax schedule that implements the optimum. g. Can quantity restrictions implement the optimum in this case? Please explain why or why not. Suppose Ron Swanson suggests to Leslie mmat she should consider the trading of noise emission permits. Each nightclub is given 5 tradable noise emission permits. In essence, owning 1 permit allows the nightclub to emit 1 unit of noise. h. After trading, how many permits do each nightclub have? Briey ex- plain your answer and compare the outcome to the social optimum