Question 4 A farm is located next to a steel mill. The cows are free to go into the field but are hurt by the pollution created by the steel mill, which creates a negative externality. The profit function for the farmer is of = 4C - C2 -28 where C is the number of cows the farmer has and S is the amount of mills the steel mill has. The profit function for the steel mill is TS = 6S - $2. The two firms merge to internalise the externality. What are the outputs they end up producing as one merged firm? (a) C = 2 and S = 3. (b) C = 4 and S = 2. (c) C = 2 and S = 2. (d) C = 4 and S = 3