Elm Industries receives profits from polluting according to the formula: pi =10Q−Q^2 where Q = pollution emitted (in tons), and profits are measured in dollars. The damages associated with pollution from this facility are estimated to be: D=Q^2 +2Q
(c) What is the efficient level of Q for this firm? How much profit would Elm Industries earn at this level of production? How much would total damages be? What would be the net benefits?
(d) What is the deadweight loss associated with Elm Industries ignoring the damages that its production causes? Show the deadweight loss on your diagram.
(e) Those who live near Elm Industries propose that it produce no more than Q = 1. What is the deadweight loss associated with this level of production? Show this DWL on your graph.