Question: Problem 2: 26 points Oil is an important source of energy. Extracting and burning oil also causes ecological damage. Let Q be the quantity:' of

Problem 2: 26 points Oil is an important source of energy. Extracting and burning oil also causes ecological damage. Let Q be the quantity:' of oil. The demand for oil is given by: P = 140 - Q. The aggregate marginal cost of producing oil is: MCpmd = Q. The monetized marginal environmental damage caused by oil is: MCerw = 20 + Q. a) [4 points] What is the name ofthe market failure at work with oil production and use? b) [6 points] How much oil will be produced in the free market (Om)? Calculate and show on a well- labeled graph of the situation. Qm =

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