please help answer 3.5-3.7;4.3-4.7. This two pics are one problem.
3 Externalities I Consider the market for private economics tutors in Davis. Assume it is perfectly compet itive. The market's inverse demand curve is p = 1600 5Q, with Q being the number of students receiving tutor per quarter and 19 being price per quarter. Economics tutors' private marginal cost curve is M CP = 100 + 562. 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 M CC = Q. 2 3.1 Please nd the perfectly competitive equilibrium of this mar- ket. 3.2 Please nd the socially optimal equilibrium of this market. 3.3 Please draw this market, including the following curves demand, private marginal cost, and social marginal cost. Also label the following pointsthe perfectly competitive equilib- rium and the socially optimal equilibrium. Also please label axes and where curves cross axes. 3.4 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. 3.5 What standard should the City of Davis set? Now suppose that instead of a standard the City of Davis wants to impose a specic tax on this market to ensure the socially optimal equilibrium. 3.6 What specic tax should the city of Davis set? Now suppose that instead of a standard or specic tax the City of Davis wants to ensure the socially optimal equilibrium by assigning property rights to students to not have their grade lowered by other students' performance. 3.7 Why might assigning property rights fail to ensure the socially optimal equilibrium? Please give at least three reasons. 4 Externalities II 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. 4.1 Please nd the un-regulated monopoly equilibrium of this market. 4.2 Please nd the socially optimal equilibrium of this market. 4.3 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. 4.4 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. 4.5 What standard should the City of Davis set? Now suppose that instead of a stande the City of Davis wants to impose a specic tax on this market to ensure the socially optimal equilibrium. 4.6 What specic 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. 4.7 What would the marginal cost of curving need to be for the unregulated monopoly equilibrium to be the socially optimal equilibrium
