Figure 5.5 Figure 5.5 shows the market for apartments in Springfield.Recently, the government imposed a rent ceiling of $1000 per month.
-Refer to Figure 5.5.The value of the portion of producer surplus transferred to consumers as a result of the rent ceiling is

Question

Figure 5.5  Figure 5.5 shows the market for apartments in Springfield.Recently, the government imposed a rent ceiling of $1000 per month.
-Refer to Figure 5.5.The value of the portion of producer surplus transferred to consumers as a result of the rent ceiling is

Quizplus · Accepted Answer

The value of producer surplus before the rent ceiling was implemented was $225,000. After the rent ceiling of $1000 was imposed, the new equilibrium quantity of apartments rented decreased to 250, and the new equilibrium price was $1000. The area of consumer surplus after the rent ceiling was implemented is ($1000-$800) x 250 /2 = $31,250. The value of producer surplus after the rent ceiling was implemented is ($1000-$600) x 250 /2 = $62,500. Therefore, the value of the portion of producer surplus that was transferred to consumers is $62,500 - $22,500 = $40,000, which corresponds to answer choice B.

Figure 55 Figure 5