Please answer part b and c

1. Pricing Restrictions versus Quantity Restrictions: 40 points Consider two nightclubs in Pawnee, called the Snakehole Lounge and the Bulge. They both have the same constant (private) marginal cost of production (2. The market de- mand for nightlife in Pawnee is D (p) , where p is the price of entry and demand is decreasing in p. The firms engage in price competition: The demand for the Snakehole Lounge is 0 PS > PB 135 (P5473) = %D (P5) P3 = PB , D (P5) P3 {3. 1 b. Argue why none of the rms will adopt the pollution reduction technology in the equilibrium in one sentence. (3 points) Suppose that the damage the noise pollution causes the environment is linear in the total units of harmful noise. Hence, the benet of noise reduction is H(Zs+ZB) =Zs+ZB, where 25 and 23 are the total reduction of the Snakehole Lounge and the Bulge respec- tively. c. What is the socially optimal amount of reduction? Underline your answer. Hint: The social benet of reduction is 25 + z B and the social cost of reduction is as (25) + CB (ZB)- (4 points)