Which of the following is a possible outcome of setting a legal maximum rental rate below the market clearing rental rate?
A) an increase in the quantity of rental housing supplied
B) a decrease in the quantity of rental housing demanded
C) a black market in rental housing
D) a surplus of rental housing

Question

Quizplus · Accepted Answer

Setting a legal maximum rental rate below the market clearing rate often leads to a shortage of rental housing because the price is artificially kept lower than what the market would naturally determine. This can incentivize the creation of a black market, where rental agreements are made outside of the regulated price controls, often at higher rates. Choices A and D are incorrect because a price ceiling typically reduces the quantity of housing supplied and does not lead to a surplus. Choice B is incorrect because a lower price increases, rather than decreases, the quantity demanded.

Which of the Following Is a Possible Outcome of Setting