menu
bartleby
search
close search
Hit Return to see all results
close solutoin list

Suppose the city of Arcata, California, imposes rent control so that rents cannot exceed $1,000 per month on one-bedroom rental units. Suppose $1,000 had also been the equilibrium rental price in Arcata before a huge new apartment complex was built in the nearby town of McKinleyville, where rents are $800 per month. Which of the following is most likely true? a. There will be a shortage of rental housing in Arcata at the rent control price of $1,000. b. There will be a lasting surplus of rental housing in Arcata after the new apartment complex is built in McKinleyville. c. The equilibrium rental price in Arcata will fall below $1,000; thus, rent control will not affect the rental market in Arcata. d. The equilibrium price of $1,000 per month in Arcata will not change.

BuyFindarrow_forward

Economics For Today

10th Edition
Tucker
Publisher: Cengage Learning
ISBN: 9781337613040

Solutions

Chapter
Section
BuyFindarrow_forward

Economics For Today

10th Edition
Tucker
Publisher: Cengage Learning
ISBN: 9781337613040
Chapter 4, Problem 14SQ
Textbook Problem
9 views

Suppose the city of Arcata, California, imposes rent control so that rents cannot exceed $1,000 per month on one-bedroom rental units. Suppose $1,000 had also been the equilibrium rental price in Arcata before a huge new apartment complex was built in the nearby town of McKinleyville, where rents are $800 per month. Which of the following is most likely true?

  1. a. There will be a shortage of rental housing in Arcata at the rent control price of $1,000.
  2. b. There will be a lasting surplus of rental housing in Arcata after the new apartment complex is built in McKinleyville.
  3. c. The equilibrium rental price in Arcata will fall below $1,000; thus, rent control will not affect the rental market in Arcata.
  4. d. The equilibrium price of $1,000 per month in Arcata will not change.

To determine

 The impact of a new huge apartment complex in the nearby town on the rental houses.

Explanation of Solution

The final goods and services are served in the market for the consumers. The total market demand is the summation of individual demands, and the total supply in the market is the summation of individual supplies in the economy. The equilibrium is the point where the demand equals the supply in the economy.

Option (c):

When there is a rent control mechanism in the economy, the renters cannot charge a rent that is higher than the controlled level. Here, the rent control is at $1,000 per month. When the new apartment complex opens up at renting rate of $800, the demand in Arcata will fall as it has a higher rent. This will decrease the price and will cause the rent to go below the $,1000. Hence, the rent control will become ineffective in the economy. Thus, option 'c' is correct.

Option (a):

When the new housing apartment complex provides the houses at a lower rental rate of $800 per month, the demand for the $1,000 houses will fall causing a surplus...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Chapter 4 Solutions

Economics For Today
Show all chapter solutions
add
Ch. 4 - Suppose a market is in equilibrium and both demand...Ch. 4 - Consider this statement: Government involvement in...Ch. 4 - Suppose coal-burning firms are emitting excessive...Ch. 4 - Explain the impact of external costs and external...Ch. 4 - Why are public goods not produced in sufficient...Ch. 4 - Which of the following are public goods? a. Air...Ch. 4 - A decrease in demand with the supply held constant...Ch. 4 - An increased equilibrium price and a decreased...Ch. 4 - Assume no price ceiling exists in a market. Then a...Ch. 4 - Which of the following is not an example of market...Ch. 4 - A cost imposed on people other than the consumers...Ch. 4 - Suppose X and Y are substitutes. If the price of Y...Ch. 4 - If the cost of producing a good rises for sellers,...Ch. 4 - If goods A and B are complements, and the price of...Ch. 4 - Suppose Big-Cat and Fat-Cat are rival cat food...Ch. 4 - Suppose the average equilibrium monthly rental...Ch. 4 - If a price ceiling is set at 10, and the...Ch. 4 - Suppose the state of California imposes a minimum...Ch. 4 - Suppose the federal government imposes a price...Ch. 4 - Suppose the city of Arcata, California, imposes...Ch. 4 - Suppose the federal government provides wheat...Ch. 4 - If society allows firms to freely pollute the...Ch. 4 - If there are external benefits for good X, which...Ch. 4 - Suppose the federal government imposes a new...Ch. 4 - Why dont competitive markets do a good job...Ch. 4 - Which of the following is not an example of market...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions add
Explain how an increase in the price level affects the real value of money.

Brief Principles of Macroeconomics (MindTap Course List)

P/E AND STOCK PRICE Fontaine Inc. recently reported net income of 2 million. It has 500,000 shares of common st...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Describe the steps to follow when using the allowance method to account for uncollectible accounts.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

Describe the eight elements of ERM.

Accounting Information Systems