Exercise A.6. Mr Smith has a monopoly on housing rentals in a small township. The inverse rental demand function is P=400-2Q. Mr Smith's marginal cost of provisioning rental housing is CM(Q)=3Q+50. Suppose that, to ease the burden on tenants, the local government has set a rental price ceiling of €260. Will consumer surplus increase due to this rent ceiling? Will it increase social welfare? Illustrate your reply graphically.

Exercise A.6. Mr Smith has a monopoly on housing rentals in a small township. The inverse rental demand function is P=400-2Q. Mr Smith's marginal cost of provisioning rental housing is CM(Q)=3Q+50. Suppose that, to ease the burden on tenants, the local government has set a rental price ceiling of €260. Will consumer surplus increase due to this rent ceiling? Will it increase social welfare? Illustrate your reply graphically.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Demand for apartments in town is D (x) =860 – 3x, and the supply is S (x) =500+9x, %3D where x is the number of apartments, in hundreds, and D (x) and S(x) are the rent in dollars per month, per apartment. The equilibrium point is (30, 770). Suppose a maximum rent of $644 per month is imposed by the town council. Find the deadweight loss. $ 1176 $ 1152 $ 16 $ 3072
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