=+14.10 Policy Application: School Vouchers and the Private School Market: In the United States, private schools charge tuition and compete against public schools that do not. One policy proposal that is often discussed involves increasing demand for private schools through school vouchers. A school voucher is simply a piece of paper with a dollar amount V that is given to parents who can pay for some portion of private school tuition with the voucher if they send their child to a private school. (Private schools can then redeem the vouchers for a payment of V from the government.) Assume throughout that private schools strive to maximize profit.

A. Suppose private schools have U-shaped average (long-run) cost curves, and the private school market in a metropolitan area is currently in long-run equilibrium (in the absence of private school vouchers).