The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment: Quantity First bottle Second bottle Third bottle Fourth bottle Fifth bottle Further bottles Willingness to Pay (Dollars) 10 8 6 4 Each Whovillian will The cost of producing a bottle of Zlurp is $3.50, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) 2 0 bottles rec Producing Zlurp creates pollution. Each bottle has an external cost of $1. consumer surplus of Taking this additional cost into account, total surplus per person in the allocation you previously determined decreases to $ Consumption per person is now Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by 1 bottle. Cindy's consumer surplus (ignoring the cost of pollution she experiences) is now $ by $ Mayor Grinch imposes a $1 tax on each bottle of Zlurp. Her decision bottles. This yields a per-person consumer surplus of $ increases decreases total surplus in Whoville not including the cost of pollution, a per-

The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment: Quantity First bottle Second bottle Third bottle Fourth bottle Fifth bottle Further bottles Willingness to Pay (Dollars) 10 8 6 4 Each Whovillian will The cost of producing a bottle of Zlurp is $3.50, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) 2 0 bottles rec Producing Zlurp creates pollution. Each bottle has an external cost of $1. consumer surplus of Taking this additional cost into account, total surplus per person in the allocation you previously determined decreases to $ Consumption per person is now Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by 1 bottle. Cindy's consumer surplus (ignoring the cost of pollution she experiences) is now $ by $ Mayor Grinch imposes a $1 tax on each bottle of Zlurp. Her decision bottles. This yields a per-person consumer surplus of $ increases decreases total surplus in Whoville not including the cost of pollution, a per-

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.13P

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Suppose that the demand and supply schedules for rental apartments in the city of Gotham are as given in the table below. Monthly Rent Apartments Demanded Apartments Supplied $2,750 10,000 15,000 2,250 12,500 12,500 1,750 15,000 10,000 1,250 17,500 7,500 750 20,000 5,000 Instructions: Enter your answers as whole numbers. a. What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied? Market equilibrium rental price is: Market equilibrium quantity is: b. If the local government can enforce a rent-control law that sets the maximum monthly rent at $1,750, will there be a surplus or a shortage? Of how many units? How many units will actually be rented each month? c. Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $2,750 per month. If the government can enforce that…
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