Assignment
Instructions:
1. Please answer the following two questions.
2. Please limit your answer to a total of four pages for the assignment (graph/s included).
3. Please type your answers. Graph/s may be drawn and not typed.
Question 1:
Use supply and demand analysis to show the effect of a (binding) price ceiling in the market for rental properties.
• What are the possible negative effects due to this price ceiling?
• What happens to the total surplus (total surplus = consumers' surplus + producers' surplus)?
• Why do governments use price ceilings despite these negative effects?
• Who might benefit from this price ceiling?
Question 2:
Explain the different outcomes between perfect competition and monopoly ("regular" monopoly).
Use a single graph to illustrate this difference.
• Please talk about ALL relevant differences between the two market structures including, but not limited to, basic assumptions, equilibrium quantity, equilibrium price, consumers', producers', and total surplus, etc.