Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-5. What is the value of producer surplus after the imposition of the ceiling?

Question

Quizplus · Accepted Answer

The ceiling price is $200, and the equilibrium price without the ceiling is $250. Producer surplus is the area above the supply curve and below the price line. With the ceiling price, producer surplus is the area above the supply curve and below the ceiling price line. This area is a triangle with a base of 100 units and a height of $50. Therefore, producer surplus after the imposition of the ceiling is $50,000.

Figure 4-5 Shows the Market for Apartments in Springfield