Consider the market for private economics tutors in Dallas. Assume it is perfectly competitive. The market's inverse demand curve is p = 1600 - 5Q with Q being the number of students receiving tutor per quarter and p being price per quarter. Economics tutor's private marginal cost curve is MC^P = 100 + 5Q. Also assume that, because economics professors curve their classes, when one student improves her grade, it causes every other student to have a lower grade. This is a negative externality. Assume the marginal cost of curving is MC^C = 5/2Q.

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.

1. What is the un-regulated monopoly equilibrium of this market?
2. What is the socially optimal equilibrium of this market?
3. Draw this market, including the following curves - demand, marginal revenue, private marginal cost, and social marginal cost. Also label the following points - the unregulated monopoly equilibrium and the socially optimal equilibrium. Also please label axes and where curves cross axes.
4. What is deadweight loss in this market?
5. Suppose the City of Dallas wants to ensure the socially optimal equilibrium in this market by imposing a standard. What standard should the City of Dallas set?
6. Now suppose that instead of a standard the City of Dallas wants to impose a specific tax on this market to ensure the socially optimal equilibrium. What specific tax should the city of Dallas set?
7. 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. What would the marginal cost of curving need to be for the un-regulated monopoly equilibrium to be the socially optimal equilibrium.