The question requires us to determine the result of the
Explanation of Solution
At the
Equilibrium rent = $500 per month
The equilibrium quantity of apartments = 200,000 units of apartments
The government sets a price ceiling of $400. At the price ceiling, consumers are willing to purchase 220,000 units of apartments while the producers are willing to sell 180,000 units of apartments.
At a price ceiling of $400 rent per month,
Quantity demanded = 220,000 units
Quantity supplied = 180,000 units
Since the quantity demanded is higher than the quantity supplied, the market will face a shortage of apartments.
Shortage = Quantity demanded − Quantity supplied = 220,000 − 180,000 = 40,000.
Thus, when the government sets a price ceiling at $400, the market will face a shortage of 40,000 units of apartments.
Option “d” is correct
The
Chapter 2R Solutions
Krugman's Economics For The Ap® Course
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