Question- You are the Minister and are considering a project providing citizens with a service. It is common knowledge that the demand for this service is given by P = 10 - Q, where P is the price and Q is the amount/level of service used by citizens.

1. Your Deputy Minister claims this service has a constant marginal cost of $8. If you believe her, what would be the optimal amount of service? (that is, what is the quantity of service that maximize total surplus?) What is the total cost of this project (that is, how much should you allow your Deputy Minister to spend on this project) ? Also show in a demand diagram, the optimal quantity, the area corresponding to the total cost of the project, and the area corresponding to the gross value of the project. 2. Assuming the minister orders you to provide the level of service from question 1 and allows you to spend the corresponding budget from question 1, how much "slack" did you create for you? Also show in the diagram you used to answer question 1, the area corresponding to this "slack".