1. Suppose there is a monopolistic car company in a country with 10,000 car owners. All cars produced by the car company are sold to these car owners at the current prices. The car owners drive 8,000 miles per year on average. The car company produces two types of car (10,000 cars produced in total): car A that achieves 25 MPG and sold at $20,000 car B that achieves 50 MPG and sold at $50,000 The car company's profit function is PA QA + PBQB - 2Q1 - 8Q3, where PA and PB are prices and QA and QB are quantities sold. This function implies that car B is more costly to produce, when compared to car A. What is the profit-maximizing production level of car A and car B? What is the annual aggregate consumption of gasoline for cars? 2. Now suppose 50% of the car owners become environmentalists and prefer car B over car A at the current prices. What is the profit-maximizing production level of car A and car B? Is it different from your answer to question 1? Explain. 3. If the environmentalists agree to pay a premium of $10,000 for car B (i.e., the total price is now $60,000), what would be the profit-maximizing production level of car A and car B? How about the annual aggregate consumption of gasoline for cars? 4. If the environmentalists agree to pay a premium of $30,000 for car B (i.e., the total price is now $80,000), what would be the profit-maximizing production level of car A and car B? How about the annual aggregate consumption of gasoline for cars? 5. Suppose the environmentalists' utility function is as follows: U = vmiles + 100.other goods The price of gasoline is $5 per gallon and the price of other goods is $2 per unit. Each of the environmentalists' maximum budget is $80,000 per year. What is the utility- maximizing number of miles driven among the environmentalists? Assuming the non- environmentalists continue to drive 8,000 miles per year on average, what is the annual aggregate consumption of gasoline for cars? Use the profit-maximizing production level from question 4