4. [10 points total] There are 4 firms in the market, producing homogeneous goods. Suppose that the government is concerned that firms in a market might be colluding, so it wishes to identify conduct in the market. (a) [5 points] Based on data it has collected, the government sees that the current market price is p = 8 and estimates the demand elasticity at this price is = = 2. Administrative data from the firms also shows that MC = 7. Based on this data, is it reasonable for the government to conclude that the firms are colluding?(b) [5 points] Suppose instead that the government had observed price p = 3 and estimated the elasticity to be le = , but did not observe the marginal cost. Can the government at least rule out "perfect collusion," where the firms collude to maintain the monopoly price? Can it rule out "some collu- sion," where firms collude to raise price but can't quite reach the monopoly price? (Hint: think about what the fact that MC > 0 tells you about the conduct parameter.)