Consider the perfectly competitive market for strawberries at the SF farmers market. The market's inverse demand curve is p = 720 10Q. Firms selling strawberries at the farmers market have marginal cost curve MCP = 10Q. Also assume that, because there is a fixed amount of space at the farmers market, each strawberry sold at the farmers market has negative social cost (less bread stands!), with a cost of space-taking of MCst = 15Q. However, because having stawberries around the farmers market puts buyers in a good mood, there is also a positive externality that strawberry firms receive equal to MBgm = 5Q (MB is marginal benefit).

Now assume that one farm owned by an ex-legal official of USF has bribed the SF farmers market officials to obtain a monopoly in selling strawberries at the farmers market. Assume the demand and marginal cost curves stay the same.

A. What is the un-regulated monopoly equilibrium in this market in terms of price and quantity?

B. What is the Deadweight Loss (DWL) in this market?

Suppose again that the SF farmers market wants to set a quantity standard on this market to ensure the socially optimal level of strawberries.

C. What standard should the SF farmers market set in the case of the monopoly?