Continue from the previous question. Suppose the government thinks the rent is still too high, and further decides to lower the rent ceiling to $1,000 per month. What is the value of the consumer surplus after the ceiling has been changed?

(Assume that the production is allocated to the lowest cost producers and the consumption is allocated to the highest valuation consumers.)

The following figure shows the market for apartments in Hoppyvalley. (Both demand and supply curves are linear)

The government has implemented a rent ceiling of $2000. What is the value of the consumer surplus after the ceiling has been implemented?

(Assume that the production is allocated to the lowest cost producers and the consumption is allocated to the highest valuation consumers.)

Continue from the last question.

With a price ceiling at $500 per apartment. Suppose now people compete to purchase the house by paying a bribe. The bribe amount is observable to everyone in the market and therefore everyone pays the same amount of bribe. What is the total revenue for the bribe-receivers in this market?

Below is current housing market in the Twin cities. The market is in equilibrium today.

Suppose the government decides to impose a price ceiling at $500/apartment. What is the consumer surplus when the consumer cannot use any other means to signal their price (i.e. no bribe, no waiting time, no extra brokerage fee) and the apartments are sold to those who value the apartments the most?

I. The rent price will increase.

II. The demand for rental housing will decrease.

III. The supply for rental housing will increase.

IV. The quantity demanded for housing will fall.

I. 9

II. 11

III. 13

IV. 15

1. Goods allocated to buyers who value them the most without competition
2. Bribery

3. Wasteful

   competition

4. Goods allocated NOT to buyers who value them the most.

Which of the

following remains the same in all the 4 cases?

I. Decrease in price

II. Decrease in quantity transacted

III. Decrease in total social surplus