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5 Externalities 11 Now assume that one private economics tutor takes over the entire market because the tutor has a lower marginal cost than any

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5 Externalities 11 Now assume that one private economics tutor takes over the entire market because the tutor has a lower marginal cost than any other tutor. So now the market has a monopoly. But assume that the demand and marginal cost curves stay the same. 5.1 Please find the un-regulated monopoly equilibrium of this market. 5.2 Please find the socially optimal equilibrium of this market. 5.3 Please draw this market, including the following curves demand, marginal revenue, private marginal cost, and so- cial marginal cost. Also label the following pointsthe un- regulated monopoly equilibrium and the socially optimal equi- librium. Also please label axes and where curves cross axes. 5.4 What is deadweight loss in this market? Now suppose that the City of Davis wants to ensure the socially optimal equilibrium in this market by imposing a standard. 5.5 What standard should the City of Davis set? Now suppose that instead of a standard the City of Davis wants to impose a specific tax on this market to ensure the socially optimal equilibrium. 5.6 What specific tax should the city of Davis set? Now assume that due to a policy change, economics professors start curving more strictly and the negative externality in the market for private economics tutors increases. 5.7 What would the marginal cost of curving need to be for the un-regulated monopoly equilibrium to be the socially optimal equilibrium

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