Suppose the equilibrium rent for apartments in Boston is $1,600.If the city of Boston imposes a price ceiling of $1,200,there will be a(n):
A)increase in producer surplus for each landlord.
B)surplus of new apartments in Boston.
C)increase in consumer surplus for Bostonians who can find apartments for $1,200.
D)increase in total surplus.

Question

Quizplus · Accepted Answer

If the city of Boston imposes a price ceiling of $1,200, some landlords may decide to exit the market, reducing the supply of apartments. This reduced supply will lead to an increase in the shortage of apartments, which will lead to an increase in consumer surplus for those who can find a $1,200 apartment. However, this reduction in supply will also reduce total surplus as some people will not be able to find apartments, leading to a decrease in producer surplus and deadweight loss. Therefore, options A, B, and D are incorrect.

Suppose the Equilibrium Rent for Apartments in Boston Is $1,600