Question 2 (10 Total Marks} Conditional versus Unconditional Grant The Regional Government has a budget of $10,000. It spends its money on sewage treatment {X} and other goods (Y). Px=$200 Py=$100 Suppose the Provincial Government wants to encourage the Region to invest more in sewage treatment and offers the Region a matching grant. For ever}r $1 the Region spends on sewage treatment, the Province will give it $1. The Region is initially in equilibrium at E. Y other goods 100 95 90 85 80 75 70- 65 60 55 50 E 45 13 40 35 10 30 25 20 15 10 5 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 Xsewage treatment 1) If the Region were to take the conditional grant, what would be its utility improvement ? (1 mark)2} What is the total expenditure required to purchase the new amount of sewage treatment? (1 mark) 3} How much of this required expenditure is from the conditional grant? (3 marks) 4} How much is from the Region's own budget? (1 mark} 5} If, instead of the conditional grant, the Province provided the region with an income transfer (Le. an unconditional grant) equal to the amount of the conditional grant found in {3}, would the Region continue to purchase the same amount of sewage treatment? If not, why not? (2 marks} 6} What is the amount of sewage treatment purchased under the unconditional grant? 'Why is the unconditional grant considered more efficient? (2 marks)