Lynn owns a tutoring center that supplies SAT and ACT test preparation service for high school students on an hourly basis. Consider the demand, marginal revenue, and marginal cost she faces, shown in the following graph:

a. Does Lynn’s business have market power? Briefly explain your answer. 

b. In order to maximize her profits, how many hours of tutoring should Lynn’s business supply, and at what price? 

c. What would the socially efficient quantity be in this market? 

d. Why is the profit-maximizing outcome inefficient?  

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Price ($ per hour) $37 $30 $27 $20 Marginal cost Demand Marginal revenue Hours supplied 20 40 60 Stevenson/Wolfers, Principles of Economics, 1e, 2020 Worth Publishers