3-. no merits} US Milk Co. and EU Milk Co. are milk producers. U5 Miik Co. produces in the United States while EU Miik Co. produces in Europe. Both rms sell very similar products {milk} to consumers around the world. Say that the demand curve for a tank [i.e. 5E! litres] of milk is given by: Q = 35C! p where Q = q! + lia- is the total number of SCI-litre tanks of milk produced by US Milk Co. and EU Miik Co.; p is the price of each Elitre of milk measured in 5. Assume that the marginal cost of producing each tank of milk is $20 for U5 Milk Co. and $15 for EU Milk Co. The U5 is thinking of subsidising U5 Milk {11's production so that it can better compete with its European rival. i. {I marks} Initially neither nn receives a subsidy. If both rms seek to maximise prot, how many Elllitre tanks of milk will each produce and what will their prots be? Illustrate the solution on a diagram. ii. {4 marks} The US Government pays U5 Milk do. a subsidy of $1!) for each SCIlitre tank of milk it produces. Assume that the European Union does not retaliate. How many Slitre tanks of milk will each rm produce now and what will their prots be?I Draw the new solution on the same diagram. iii. ['6 marks} Which nn gains and which rm loses from the subsidy? With the aid of diagrams, explain why. iv. ['6 marks} Calculate the optimal subsidy that the US Government could provide to US Milk o. That is. assuming Europe does not retaliate. calculate the subsidy that will maximise US Milk Co's prot