Figure: Random Allocation under Price Ceilings
Refer to the figure. The government enacted a price ceiling of $6 per unit. Using the information provided in the graph, calculate the following:
a. If the goods are allocated randomly between the high-value uses and the low-value uses, what is the total amount of consumer surplus in dollars?
b. What is the lost amount of consumer surplus when goods are allocated randomly, when compared to a situation in which the goods are allocated only to the highest-value uses?

Question

Figure: Random Allocation under Price Ceilings  
 Refer to the figure. The government enacted a price ceiling of $6 per unit. Using the information provided in the graph, calculate the following:
a. If the goods are allocated randomly between the high-value uses and the low-value uses, what is the total amount of consumer surplus in dollars?
b. What is the lost amount of consumer surplus when goods are allocated randomly, when compared to a situation in which the goods are allocated only to the highest-value uses?

Quizplus · Accepted Answer

The Answer of Figure: Random Allocation under Price Ceilings  
 Refer to the figure. The government enacted a price ceiling of $6 per unit. Using the information provided in the graph, calculate the following:
a. If the goods are allocated randomly between the high-value uses and the low-value uses, what is the total amount of consumer surplus in dollars?
b. What is the lost amount of consumer surplus when goods are allocated randomly, when compared to a situation in which the goods are allocated only to the highest-value uses?

Figure: Random Allocation Under Price Ceilings