Question (15 marks) a. Briefly explain whether you agree or disagree with the following statement: 'Sulphur dioxide emissions cause breathing difficulties for people with respiratory problems. The total benefit to society is greatest if we eliminate Sulphur dioxide emissions. Therefore, the economically efficient level of emissions is zero.' (5 Marks) b. Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river. The waste material affects the number of fish in the river, and the use of the river for recreation and as a public water supply source. Figure below shows the paper market. Use this Figure to answer the following questions. (10 marks) Price S2 of paper S. Demand Q2 Quantity of paper i . In the above graph, what does $1 represent? (2 marks) ii. In the above graph, what does $2 represent? (2 marks) iii. What is the equilibrium quantity of paper produced in the private market? What is the socially optimal quantity of paper? (2 marks) iv . Briefly explain the misallocation of resources resulting from the private market equilibrium, and suggest a solution to improve the allocation of resources. (4 marks)