Multiple Choice
On which types of goods do governments most commonly impose price ceilings?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Price Ceilings, Price Floors, and Black Markets
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Which of the following is an unintended effect of rent control policies?
A
A surplus of vacant apartments
B
A shortage of available rental housing
C
An increase in the quality of rental units
D
A decrease in demand for rental housing
Verified step by step guidance1
Understand the concept of rent control: Rent control policies set a legal maximum price (rent ceiling) below the market equilibrium rent to make housing more affordable.
Recall the basic supply and demand framework: When a price ceiling is set below the equilibrium price, the quantity demanded exceeds the quantity supplied, leading to a shortage.
Analyze the effects of rent control: Because landlords receive less rent, they may reduce maintenance or convert apartments to other uses, decreasing the quantity and quality of available rental housing.
Identify the unintended consequences: The shortage of available rental housing is an unintended effect because while rent control aims to help tenants, it reduces the incentive for landlords to supply or maintain rental units.
Eliminate incorrect options: A surplus of vacant apartments is unlikely since rent is kept low, increasing demand; an increase in quality is also unlikely due to reduced landlord incentives; and demand typically increases, not decreases, under rent control.
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