Question

Suppose that the city of Rentville sets a price ceiling of $800 a month on all apartments, although the market equilibrium rent is $1,000. Which of the following is least likely to occur? a) An increase in the quantity of existing apartments in Rentville. b) A decrease in new apartments being built in Rentville. c) A shortage of apartments in Rentville. d) An excess of quantity demanded over quantity supplied in the market for apartments.

Answer 1

Answer: a) An increase in the quantity of existing apartments in Rentville

Explanation:

A price ceiling is the maximum price that a good or service can be sold.

The price ceiling ( $800) is less than the equilibrium rent ($1000). This would lead to a reduction in supply of houses and an increase in demand.

When demand outstrips supply, shortages occur.