Question 1

In a market with a rent ceiling set below the equilibrium rent, the producer and consumer surplus

Accepted Answer

When a rent ceiling is set below the equilibrium rent, it typically results in a shortage of supply as demand exceeds supply at that price point. This leads to inefficiencies in the market, where some consumers willing to pay more cannot find housing, and some landlords receive less than what they would in an unregulated market. Both producer and consumer surplus decrease because the quantity of transactions in the market is reduced, but they are generally not reduced to zero because there are still some transactions that occur at the controlled price.

Question 2

A price ceiling

Accepted Answer

Price ceilings often lead to shortages as the demand for the good exceeds the supply at the lower price imposed by the ceiling. This can create a black market where the good is sold at an unregulated higher price, allowing suppliers to earn greater profits.

Question 3

With a rent ceiling set below the equilibrium rent, i. all renters are able to rent flats at a lower rent.
Ii) there is a shortage of flats.
Iii) the quantity of flats supplied does not change because buildings cannot be moved.

Accepted Answer

ii) When a rent ceiling is set below the equilibrium rent, it causes a shortage of flats because the lower price increases demand but discourages supply, leading to a situation where the quantity demanded exceeds the quantity supplied.

Question 4

The deadweight loss in a housing market with a rent ceiling set below the equilibrium rent is the

Accepted Answer

Deadweight loss in the context of a rent ceiling set below the equilibrium rent includes the loss to potential tenants who cannot find apartments due to the shortage created by the price ceiling, and the loss to landlords who are unable to rent out their properties at a profitable rate. This leads to inefficiencies in the market, where supply does not meet demand, resulting in a welfare loss to society.

Question 5

One of the consequences of a rent ceiling set below the equilibrium rent is

Accepted Answer

When a rent ceiling is set below the equilibrium rent, it creates a shortage of apartments because the price is artificially kept lower than what the market would naturally determine. This leads to increased search activity as more people are competing for fewer available apartments.

Question 6

In a housing market with a rent ceiling below the equilibrium rent, apartment seekers spend more time searching for an apartment than they would in a housing market without a rent ceiling. Why does this difference exist?

Accepted Answer

With a rent ceiling below the equilibrium rent, the quantity of housing demanded is greater than quantity supplied at the ceiling price. This leads to a shortage of available apartments and competition among apartment seekers, causing them to spend more time searching for an apartment that meets their needs and budget. This is in contrast to a market without a rent ceiling, where supply and demand are determined by the market forces, leading to a quicker and more efficient search process.

Question 7

The deadweight loss from a rent ceiling below the equilibrium rent is smallest when the supply of housing is

Accepted Answer

When the supply of housing is perfectly inelastic (i.e. vertical supply curve), there is no response in quantity supplied to changes in price, and so the deadweight loss from a rent ceiling will be zero. Any increase in quantity demanded will simply lead to a shortage of housing as there is no increase in quantity supplied. Therefore, there will be no deadweight loss.

Question 8

When a rent ceiling below the equilibrium rent is put in place, the outcome is

Accepted Answer

A rent ceiling set below the equilibrium rent creates a shortage, as the quantity demanded exceeds the quantity supplied at that price. This leads to inefficiency because the marginal benefit of renting to potential renters (who value the housing more than it costs to provide) is greater than the marginal cost to landlords. This mismatch means that not all mutually beneficial transactions are occurring, leading to a loss of economic welfare.

Question 9

-The demand and supply schedules for pizza are in the table above. If the government sets a maximum legal price of $2 per slice of pizza, then

Accepted Answer

A price ceiling set below the equilibrium price (in this case, $2 per slice) causes a shortage because the quantity demanded exceeds the quantity supplied. The correct terminology for a maximum legal price is a price ceiling, not a price floor.

Question 10

An illegal market in which the price exceeds a legally imposed price ceiling is called a

Accepted Answer

An illegal market in which the price exceeds a legally imposed price ceiling is called a black market. This occurs when there is excess demand for a good or service at the legally imposed price, leading to a shortage. Sellers may then charge a higher price in the black market to take advantage of the excess demand, despite the illegality of doing so.

Question 11

A black market for housing exists because of a rent ceiling. The rent for housing in the black market is

Accepted Answer

The rent ceiling sets a maximum legal price for housing, which creates a shortage of available housing at that price. As a result, a black market for housing emerges where landlords may charge rent above the legal ceiling. However, tenants are still not willing to pay an unlimited amount for housing, so the rent in the black market will likely be somewhere between the ceiling rent and the maximum rent a tenant is willing to pay.

Question 12

Suppose the equilibrium rent in Mildura is $1,500. A rent ceiling of $1,600 per month leads to

Accepted Answer

A rent ceiling set above the equilibrium rent does not affect the market because it does not constrain the rent to below what it would naturally settle at in an unregulated market. Therefore, the market remains at equilibrium with no surplus or shortage created by the rent ceiling.

Question 13

The opportunity cost of an apartment in a rent-controlled market is equal to

Accepted Answer

The opportunity cost of an apartment in a rent-controlled market includes both the rent charged for the apartment and the opportunity cost of searching for the apartment. This is because opportunity cost encompasses all costs associated with an action, including both explicit costs (like rent) and implicit costs (like time spent searching).

Question 14

If a price ceiling is set above the equilibrium price, then

Accepted Answer

When a price ceiling is set above the equilibrium price, it does not affect the market because the market price is already lower than the ceiling. Therefore, the market operates as if there were no ceiling, with no shortage or surplus created by the ceiling itself.

Question 15

-The figure above illustrates the bagel market. Which of the following statements is correct?

Accepted Answer

The answer of 
-The figure above illustrates the bagel market....

Question 16

-The demand and supply schedules for pizza are in the table above. A price ceiling of $2 per slice results in

Accepted Answer

At a price ceiling of $2, the quantity demanded exceeds the quantity supplied, leading to a shortage. The specific quantities for demand and supply at this price point are not provided, but the correct answer is identified based on the principle that a price ceiling below the equilibrium price causes a shortage.

Question 17

A price ceiling

Accepted Answer

A price ceiling is a government-imposed limit on how high a price can be charged for a good or service. It is the maximum price that can legally be charged.

Question 18

When a price ceiling below the equilibrium price is imposed on a good, production of the good

Accepted Answer

When a price ceiling is imposed below the equilibrium price, the quantity demanded of the good increases while the quantity supplied decreases. This leads to a shortage of the good. As producers are unable to raise the price to the equilibrium level, they may reduce their production in response to the lower price, leading to a decrease in production of the good.

Question 19

A rent ceiling set below the equilibrium rent

Accepted Answer

By setting a rent ceiling below the equilibrium rent, the price that landlords can charge for rental housing is capped. This creates a situation in which the quantity demanded of housing is greater than quantity supplied, which leads to a shortage of available housing. This shortage can result in long waiting lists, black markets, or other undesirable outcomes. However, this policy may benefit some renters by reducing the cost of housing, but overall it is likely to result in more harm than good.

Question 20

A housing shortage results when

Accepted Answer

A housing shortage occurs when the quantity of housing demanded exceeds the quantity supplied. This happens when a rent ceiling (a maximum price) is set below the equilibrium rent, as it makes it unprofitable for landlords to offer more apartments for rent, while simultaneously increasing the quantity of apartments demanded, leading to a shortage.

Quiz 7: Government Actions in Markets

In a market with a rent ceiling set below the equilibrium rent, the producer and consumer surplus

A price ceiling

With a rent ceiling set below the equilibrium rent, i. all renters are able to rent flats at a lower rent. Ii) there is a shortage of flats. Iii) the quantity of flats supplied does not change because buildings cannot be moved.

The deadweight loss in a housing market with a rent ceiling set below the equilibrium rent is the

One of the consequences of a rent ceiling set below the equilibrium rent is

In a housing market with a rent ceiling below the equilibrium rent, apartment seekers spend more time searching for an apartment than they would in a housing market without a rent ceiling. Why does this difference exist?

The deadweight loss from a rent ceiling below the equilibrium rent is smallest when the supply of housing is

When a rent ceiling below the equilibrium rent is put in place, the outcome is

-The demand and supply schedules for pizza are in the table above. If the government sets a maximum legal price of $2 per slice of pizza, then

An illegal market in which the price exceeds a legally imposed price ceiling is called a

A black market for housing exists because of a rent ceiling. The rent for housing in the black market is

Suppose the equilibrium rent in Mildura is $1,500. A rent ceiling of $1,600 per month leads to

The opportunity cost of an apartment in a rent-controlled market is equal to

If a price ceiling is set above the equilibrium price, then

-The figure above illustrates the bagel market. Which of the following statements is correct?

-The demand and supply schedules for pizza are in the table above. A price ceiling of $2 per slice results in

A price ceiling

When a price ceiling below the equilibrium price is imposed on a good, production of the good

A rent ceiling set below the equilibrium rent

A housing shortage results when