5. Consider a market with demand Q=50-2P and supply Q=3P-5. Suppose that there is a negative externality of $5/unit, and no income effects. a) Find the efficient quantity and the deadweight loss. b) How much money would the government raise from a Pigouvian tax that leads to the efficient quantity? c) If the government instead auctions off the efficient quantity of permits to the highest bidders on the supply side, what would be the price of permits? What if the permits were auctioned off to the demand side? d) A lobbyist asks you, a member of the Cabinet, to give the permits to his clients for free instead of auctioning them off "in order to avoid hurting the economy." Should you follow his advice? e) Instead of tradable permits, the Prime Minister wants to regulate the industry through non-tradable quotas. Explain why this would likely cause a deadweight loss within the market even if the quotas for each firm exactly add up to the efficient quantity.7. Your neighbor has utility w+kx, and you have utility w-cx, where c and k are positive constants, w is money and x is an indicator variable that is 1 if your neighbor listens to loud music and 0 if not. Assume that w can be any real number. a) Suppose you don't interact with your neighbor. When is the outcome efficient? What is the deadweight loss when it isn't? b) Suppose your neighbor does not have the right to listen to loud music. Could you always reach an efficient outcome? Explain. c) Suppose your neighbor has the right to listen to loud music. Could you always reach an efficient outcome? Explain. d) Assume now that w cannot be negative. Suppose you are broke (start with w=0) and your neighbor is rich, so w>c. Do your answers and/or explanations to b and c change? Why