Question Three: (lecture 8) Sunscreen protects your skin from harmful UV light and prevents the development of skin cancer. The value of this protection, which is both individual and social, is often under appreciated by consumers in Australia'. Suppose producers of sunscreen have a constant marginal cost of production of $5 per liter, that Is MC(q) = 5. The market demand, or private marginal benet, of a liter of sunscreen per year is dictated by PD = 10 - ZQD. Finally, the positive extemality of a liter of sunscreen is an $5 per liter. 3) Plot the above information on a graph that Indicates the marginal cost, private marginal benet and the social marginal benet of sunscreen. Clearly labeling the axis, all intercepts and any curves that you draw. Without any intervention, what would the market equilibrium be? Indicate this on your graph. Ideally, what would be the socially efficient equilibrium? (That is, what would be the equilibrium if consumers internalized the externality.) Indicate this on your graph. What is the dead weight loss from allowing this market to go unregulated? Explain why it Is inefcient. Suppose the government subsidized sunscreen at $5 per liter. What is the new equilibrium? Indicate this on the graph from before, making sure to label the new prices and size of the subsidy. Find the total economic surplus before and after the intervention making sure to include the government spending