(Pigouvian Tax) Gasoline brings great benefit to those who use it, but burning it also creates external costs. Consider the gasoline market with the demand for gasoline Qd = 400 - P, the private marginal cost of producing gasoline MC = 20, and the external marginal cost of producing gasoline EMC = Q. (10 points) 1) Assume that the market is highly competitive. Without any environmental reg- ulation, how much gasoline is produced? Illustrate the market equilibrium on graph. 2) Regulators can achieve the efficient level of gasoline production by imposing a tax. To achieve the efficient level of production, how big should that tax be on each unit of gasoline produced? What is the social welfare including consumer surplus, producer surplus, and tax revenue? 3) Could the same result have been achieved by assessing a tax on the buyers of gasoline? If so, how much would that tax need to be? Now assume that only one firm produces gasoline in the market. Without any environment regulation, what is the market quantity supplied by the monopo- listic firm? Discuss whether regulators can improve the social welfare with any regulation