Consider the diagram below, representing an energy supply market.

(a)i)Without government intervention, whatquantityof energy would the market produce?Comment. What would be thepriceper kilowatt?

ii)Identify thetypeand theextentof externality the market produces. Use the appropriate economic terminology in your explanation.

iii) What is the effect on society(identify in the diagram)caused by the externality. Why does this externalitycause inefficiency?Explain. What can government do to eliminate this inefficiency in the market.Explain.

iv)What is thesocially optimal output and price, after the government implementation of the appropriate policy.Comment.

(b)Explain and provide examples of the three degrees of price discrimination pricing. If relevant, in your answer highlight some of the conditions that must be hold in the market, in order tosuccessfully practice price discrimination.