Texas is one of the leading producers of fresh peaches in the United States. Some of these peaches are sold as fresh fruit, while others are sold to the local processing plants for canning. (This is a competitive industry.) Three products are created during the canning process. The first product, canned peaches, is sold in the marketplace. The other two products, liquid and solid wastes, are by-products that must be removed by canners (i.e., the processors) before canning the peaches. The liquid waste is sometimes temporarily kept in holding ponds and later released into a nearby stream or sewer. A local environmental group is lobbying the Texas legislature to regulate the release of this liquid waste. Downstream from the canning processors in Texas is a popular outdoor recreation area, with a lake that is often used for swimming, boating and fishing. When the volume of the liquid waste is at its peak during the summer months, the lake can become unsuitable for fishing and swimming, due to the increase in bacterial growth as a result of the liquid waste. The marginal cost of canning peaches for the industry is: MCcanning = 2 000 + 0.157Q where Q represents output of canned peaches in thousand of cases per week. The marginal costs of the released liquid waste have been estimated by a local environmental group to be: MCwaste = 0.043Q Demand for canned peaches is (where P is the price per thousand cases): P = 9 000 - 0.243Q a) If the Texas legislature does not regulate the release of the liquid waste, how many cases of peaches will be produced per week? What will the selling price per case be? (8 points) b) If the government does regulate the release of waste from the processing plants (i.e., requires the canning industry to directly cover the costs of the damage from the liquid waste), what is the new optimal number of cases of canned peaches produced per week (i.e., what is the socially efficient level of canned peach production)? What is the new selling price? (11 points)c) If, instead of requiring the canning industry to directly cover the costs of the damage, the government imposes a tax, what is the tax that will achieve the socially efficient level of canned peach production identified in b)? How much of this tax is paid by buyers vs. sellers? (19 points)