FIGURE 5- 1
-Refer to Figure 5- 1. If the diagram applies to the market for rental housing and P3 represents the maximum rent that can be charged, then
A) units supplied will be reduced relative to the competitive equilibrium by AF rental units.
B) there will be an excess supply of rental units equal to BD.
C) there will be excess demand for rental units equal to FC.
D) there will be excess demand for rental units equal to AF.
E) windfall profits will be earned by landlords.

Question

FIGURE 5- 1
-Refer to Figure 5- 1. If the diagram applies to the market for rental housing and P3 represents the maximum rent that can be charged, then
A) units supplied will be reduced relative to the competitive equilibrium by AF rental units. 
B) there will be an excess supply of rental units equal to BD. 
C) there will be excess demand for rental units equal to FC. 
D) there will be excess demand for rental units equal to AF. 
E) windfall profits will be earned by landlords.

Quizplus · Accepted Answer

The maximum rent that can be charged is P3. At this price, the quantity supplied is Q1 and the quantity demanded is Q2. The difference between Q1 and Q2 is AF, which represents the reduction in units supplied relative to the competitive equilibrium.

FIGURE 5- 1 -Refer to Figure 5- 1. If the Diagram Applies to Diagram