Zenobia gets a new car and has to decide how long to drive every day. Let Q be the amount of time for which Zenobia drives. Zenobia's marginal benefit from driving equals 30 - Q. The marginal cost of driving (which is the cost of gasoline) equals 5+0.25Q. 2 Driving generates both positive and negative externalities. On the negative side, Zenobia drives very fast early in the morning, and the sound of her driving wakes up her 5 neighbours (although Zenobia has no idea about this). This imposes a marginal external cost of 1 on each of her 5 neighbours per unit of time that Zenobia drives. On the positive side, Zenobia works for a charitable organization and the work that she does generates external benefits. The marginal external benefit equals 15 -0.5Q. 1. (5 pts) Suppose Zenobia chooses how much to drive, Q, without regard for her neighbours, and without considering the external benefits from her charitable work. In a graph, plot Zenobia's marginal cost and marginal benefit. What Q will she choose? 2. (5 pts) In a new graph, plot Zenobia's marginal cost and marginal benefit, as well as the marginal social benefit and the marginal social cost. What is the socially efficient choice of Q? How is this different from (a)? Explain the intuition behind your answer. 3. (5 pts) Zenobia finds out one day that her driving has been waking up her neighbours. Horrified, she decides to internalize the external cost she imposes on her neighbours. That means Zenobia's new marginal cost equals her own personal marginal cost of driving (5 + 0.25Q), plus the marginal external cost she imposes on her 5 neighbours. What will be Zenobia's new choice of Q? Will her new choice of Q make society better off compared to her original choice of Q, based on the compensation principle? Explain carefully why or why not.