The market for a renewable electricity source is characterized by: Qdemand = 10-P Qsupply = 0.5P-2

a. Calculate and graph the socially efficient quantity and price

b. The government subsidizes renewable electricity by $3. Calculate the new quantity of renewable electricity produced. Assuming the solution to part a was socially efficient, calculate the welfare loss from the subsidy and shade this in your graph from part a

c. Renewable electricity generates positive externalities from reduction in CO2 emissions. The marginal social benefits (including the positive externalities) is given by: MBsocial = 10 - 0.6Q

Calculate the socially efficient quantity and price for renewable electricity and show this in your graph for part a. How does this compare to the amount of renewable electricity obtained with the subsidy?

d. Calculate the welfare loss from the subsidy in part b, given the positive externality in part c. Shade this welfare loss in on your graph e. What would be the subsidy that results in the socially efficient quantity of renewable electricity and why?