Markets and Policy Answer the following question using economic theory. Make sure you answer all parts of the question. 1.Under what circumstances, and why, would the government be opposed to a merger of two firms? How does the Justice Department decide which mergers to challenge? 2.Explain the difference between fixed-production technology and variable-production technology. Should the government set a goal of reducing the marginal social cost of pollution to zero in industries with fixed-production technology? Should they do so in industries with variable technology? 3.What is the “regulatory dilemma”? That is, what trade-offs do regulators have to consider when deciding how to control a natural monopoly? 4.What is the underground economy? What is the impact on the underground economy of instituting a tax on a certain productive activity?