Landlords will not raise rent prices as demand increases because they are restricted by which of the following?

• A. The equilibrium price set by the free market
• B. The marginal cost of providing housing
• C. A government-imposed price ceiling on rents
• D. A government-imposed price floor on rents

Answer: (C)

Verified step by step guidance

1. Understand the concept of a price ceiling: It is a government-imposed limit on how high a price can be charged for a good or service, in this case, rent prices.
2. Recognize that when demand for housing increases, landlords might want to raise rents to capture higher willingness to pay.
3. However, if there is a government-imposed price ceiling on rents, landlords are legally restricted from raising rents above this set maximum price.
4. Compare this with other options: the equilibrium price is determined by free market forces and would not restrict landlords if no ceiling exists; marginal cost relates to supply decisions but does not legally restrict prices; a price floor sets a minimum price, not a maximum.
5. Conclude that the restriction preventing landlords from raising rents despite increased demand is the government-imposed price ceiling on rents.