-The above figure shows supply and demand curves for apartment units in a large city.If the city government passes a law that establishes $350 per month as the legal maximum rent,producer surplus
A) increases.
B) decreases.
C) stays the same.
D) changes in a direction that cannot be determined from the information given.

Question

-The above figure shows supply and demand curves for apartment units in a large city.If the city government passes a law that establishes $350 per month as the legal maximum rent,producer surplus
A) increases. 
B) decreases. 
C) stays the same. 
D) changes in a direction that cannot be determined from the information given.

Quizplus · Accepted Answer

When a price ceiling (like a legal maximum rent of $350) is set below the equilibrium price, it typically leads to a decrease in producer surplus because producers are unable to sell the apartment units at the higher equilibrium price they would prefer. This results in lower revenues for the producers of apartment units.

-The Above Figure Shows Supply and Demand Curves for Apartment