Like under Question (1), assume the private demand curve (private marginal utility) for automobile trips is given by P=2020-3Q. The private supply curve (private marginal cost curve) is given by P=200+2Q. P stands for the price of gasoline and Q for vehicles miles driven.

a) Calculate the private equilibrium

b) Now assume the external cost instead of being constantly 50 per unit, it always equals 20% of the private MC. What is the socially optimal quantity?

c) What is the DWL of the private solution?

d) Assume the city were to impose a Pigou Tax on the supply side. What is the tax ($/unit) at the privately optimal quantity? What is the tax ($/unit) at the socially optimal quantity?