Using the figure to the right, fil in the table under the assumption that a rent
ID: 1143197 • Letter: U
Question
Using the figure to the right, fil in the table under the assumption that a rent celing is set at $1,050 (If your answer is not a whole number, round alt 2 decimal places) Consumer Surplus Under Rent Control $2,800 S milion Producer Surplus ,100 Under Rent Contol Supply miltlion B c Deadwelght Loss 1.4001.0. . . . : 'E 1,050 Under Rent Control Rent celing milon Compared to the compesitive equilibrium what areals) were tranferred from producer surplus to the consumer? O A. Donly OR, Dand E Demand 2.80 Quantity (apartments per month in milions) O D. C and E O E. B and D
Explanation / Answer
Consumer surplus at competitive equilibrium = (1/2)*(2800-1400)*2.8 = $1960 Million
Consumer surplus at rent control = 1.4* (1750+1050)/2 = $1960 Million
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Producer surplus at competitive equilibrium = (1/2)*(1400-700)*2.8 = $980 Million
Producer surplus at rent control = (1/2)*(1050-700)*1.4 = $245 Million
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Deadweight loss at competitive equilibrium = 0 million
Deadweight loss at rent control = .5*(2100-1400)*1.4 + .5*(1400-1050)*1.4 = $735 million
Correct Answer:
A.D only
Explanation:
Only area D shifts to the consumer surplus from producer surplus.
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