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Externality Consider an economy in which there is a shing company, F, and a steel company, 5', both price- takers. The production of steel pollutes nature, which damages the profits of the shing indusb'y. The S costing function is E,{s.x} = 333 + 2(3 at}2 where s a D is produced steel and s a I] is the amount of pollution. The cost function for F is EFUJ) = f2 + If where f2 l] is the output from fishing. Leave the prices of steel at P3 = 13 and the price of fish PF =1 Task La Inferred market equilibrium(s'. w*,f*] and the prots of the company when pollution is free of charge. Task 1.b Deduce the socially optimal level of pollution or\" Task 1.: How a tax on pollution is being introduced to: for t 2 . Find the level of tax that ensures it socially optimum level of pollution 3:\" Task 1.d The company 'v'andland arises and this is also adversely affected by pollution in the form of increased costs. 1|.-'o.r'itfiout setting out more calculations, can you say something about whether the tax should be raised or lowered to again ensure the socially optimal level for all three companies