During the civil war, families of wounded soldiers traveled to the towns near th

Question

During the civil war, families of wounded soldiers traveled to the towns near the battle sites. People in the towns offered rooms for rent in their homes at the highest amount that peopl were willing to pay. The rented rooms were occupied by the families The producer surplus from the rented rooms is received by_ of rooms). (assuming no rerenting O A. who had traveled the greatest distance the people who occupy the rooms no one because in a disaster producer surplus is zero the same people who earn the consumer surplus ? A. ? B. B. who valued the rooms the most The consumer surplus from the rented rooms is received by C. 0 A, the same people who earn the O D. the owners of the houses OE. producer surplus the government no one because in a disaster consumer surplus is zero B. O C. the owners of the houses OD. the government ? E. the people who occupy the rooms

Explanation / Answer

The rented rooms were occupied by the families who valued the rooms most. This is because the rooms are provided at the willingness prices of the room seekers so the ones who are willing to pay more get the rooms.

The consumer surplus is received by the people who occupy the rooms. This is so because the families are the consumers of the rooms and they get utility from occupying the room by paying their maximum willingness to pay.

The producer surplus is received by the owners of the house. This is because they are the providers of the renting service and rent the rooms in the market. The producer surplus earned by them is the difference between their minimum rent price they are willing to rent rooms at and the price which they are actually charging.

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