Consider a firm that causes pollution in a lake affecting a group of individuals. The production cost of the firm is c(q) = cq2/2, where c > 0 and q is the quantity produced by the firm, and the total cost imposed on the individuals (adding the costs suffered by each of them) is (q) = q2/2, where > 0. (a) Suppose initially that the firm cannot bargain, trade, or otherwise compensate the individuals.

1. What is the profit maximizing choice of output by the firm?