If a rent ceiling is set below the equilibrium price,thus creating a ________,housing may be allocated by increasing search activity or creating a ________.
A) shortage; black market
B) shortage; free market
C) surplus; black market
D) surplus; open market
E) surplus; free market

Question

Quizplus · Accepted Answer

When the rent ceiling is set below the equilibrium price, it creates a shortage as the quantity demanded exceeds the quantity supplied. To allocate the available housing, tenants may engage in increased search activity or create a black market where they pay higher rents illegally to obtain a housing unit, leading to a higher effective rent. Therefore, option A is the correct answer. Option B, C, D, and E are incorrect as they do not correctly identify the outcome of a rent ceiling set below the equilibrium price.

If a Rent Ceiling Is Set Below the Equilibrium Price,thus