Scenario: The table below shows the reservation values of ten buyers and a seller for a loaf of bread. Each buyer would buy at most one loaf and the seller can make up to ten loaves. Initially trades happen under the market mechanism with each agent making a decision according to the market price and his or her own reservation value. Then the government imposes a price ceiling of $1.00 per unit.

-Refer to the scenario above.Suppose that,after the price ceiling is imposed,buyers reduce their reservation values by $1.50 because now they take into account the opportunity cost of waiting in line.The loss of social surplus due to the price ceiling and the fall of buyers' reservation values is ________.

Question

Scenario: The table below shows the reservation values of ten buyers and a seller for a loaf of bread. Each buyer would buy at most one loaf and the seller can make up to ten loaves. Initially trades happen under the market mechanism with each agent making a decision according to the market price and his or her own reservation value. Then the government imposes a price ceiling of $1.00 per unit.
 
-Refer to the scenario above.Suppose that,after the price ceiling is imposed,buyers reduce their reservation values by $1.50 because now they take into account the opportunity cost of waiting in line.The loss of social surplus due to the price ceiling and the fall of buyers' reservation values is ________.

Quizplus · Accepted Answer

The loss of social surplus is calculated by considering both the deadweight loss from the price ceiling and the reduction in consumer surplus due to the decreased reservation values. The correct calculation results in a total loss of $7.00.

Scenario: the Table Below Shows the Reservation Values of Ten