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.