using the figure to the right, fill in the table under the assumption that the rent ceiling is $1,050 (enter…

Explanation:

Step1: Recall consumer - surplus formula

Consumer surplus is the area between the demand curve and the price line. In competitive equilibrium, the price is $1400$ and the equilibrium quantity is $2.40$ million. The formula for the area of a triangle is $A=\frac{1}{2}bh$. The base $b$ is the equilibrium quantity and the height $h$ is the difference between the maximum price (where quantity demanded is 0, $2800$) and the equilibrium price.

Step2: Calculate consumer surplus in competitive equilibrium

$h = 2800 - 1400=1400$, $b = 2.40$ million. So, $CS_{competitive}=\frac{1}{2}\times1400\times2.40 = 1680$ million.

Step3: Calculate consumer surplus under rent - control

Under rent - control with a rent ceiling of $1050$, the quantity supplied is $1.20$ million. The consumer surplus is the sum of the area of a rectangle and a triangle. The rectangle has height $2100 - 1050=1050$ and base $1.20$ million, and the triangle has height $(2800 - 2100)$ and base $1.20$ million. The area of the rectangle $A_{rect}=1050\times1.20 = 1260$ million, and the area of the triangle $A_{tri}=\frac{1}{2}\times(2800 - 2100)\times1.20=420$ million. So, $CS_{rent - control}=1260 + 420=1680$ million.

Answer:

In Competitive Equilibrium: $1680$ million Under Rent Control: $1680$ million