Question

100,000 150,000 175,000 Quantity Refer to Figure 3. Suppose a rent ceiling is imposed in Statesboro by the Mayor of Statesboro. Assume that prior to the price ceiling the equilibrium price for rents was $900 - P2. However, he imposes the rent ceiling of $600 - P1. Georgia Southern University authorities have argued against this rent ceiling because they expect this to cause a black market rental rate to rise to $$1,100 = P3. They suspect that this will transfer their producer surplus to renters. Dr. Amponsah in the Department of Economics has asked his students in his ECON 2106 class to show the unintended consequences in the loss to the community as a result of this policy. Please calculate the value of that loss amount. 1) $12.5 million 2) $50 million O 3) $25 million 4) $30 million

Answer 1

The loss to society refers to the loss of consumer surplus and producer surplus.

Loss to society: 0.5(150 000 - 10 0000)(300) +0.5(150000 - 100 000)(200)

=12500000

or $12.5 Million

Answer: (A)