McCullough has a monopoly on rental dwellings in the local community. The demand for rental dwellings is Q_D = 70,000 - 50P $\iff$ P = 1,400 - 0.02 Q_D. The resulting marginal revenue function is MR(Q) = 1,400 - 0.04 Q_D. McCullough's marginal cost of providing rental dwellings is
MC(Q) = 0.01Q + 20. Suppose that to ease the burden on renters, the local community has instituted a price ceiling of $480. Does consumer surplus increase due to this price ceiling? Does social welfare increase as a result of the price ceiling?

Question

McCullough has a monopoly on rental dwellings in the local community. The demand for rental dwellings is Q_D = 70,000 - 50P

\iff

P = 1,400 - 0.02 Q_D. The resulting marginal revenue function is MR(Q) = 1,400 - 0.04 Q_D. McCullough's marginal cost of providing rental dwellings is
MC(Q) = 0.01Q + 20. Suppose that to ease the burden on renters, the local community has instituted a price ceiling of $480. Does consumer surplus increase due to this price ceiling? Does social welfare increase as a result of the price ceiling?

Quizplus · Accepted Answer

The Answer of McCullough has a monopoly on rental dwellings in the local community. The demand for rental dwellings is Q_D = 70,000 - 50P$\iff$P = 1,400 - 0.02 Q_D. The resulting marginal revenue function is MR(Q) = 1,400 - 0.04 Q_D. McCullough's marginal cost of providing rental dwellings is MC(Q) = 0.01Q + 20. Suppose that to ease the burden on renters, the local community has instituted a price ceiling of $480. Does consumer surplus increase due to this price ceiling? Does social welfare increase as a result of the price ceiling?

McCullough Has a Monopoly on Rental Dwellings in the Local ⟺ \iff⟺

McCullough Has a Monopoly on Rental Dwellings in the Local $\iff$