Question

Suppose a new​ off-campus university apartment complex could rent its rooms on the open market for​ $900 a month. ​If, instead, the university chooses to cap the price of rooms to​ $500 a month for​ students, the result would be that​ ____________. A. quantity demanded would exceed the quantity​ supplied, resulting in a shortage. B. quantity supplied would exceed the quantity​ demanded, resulting in a shortage. C. quantity demanded would exceed the quantity​ supplied, resulting in a surplus. D. quantity supplied would exceed the quantity​ demanded, resulting in a surplus.

Answer 1

A

Step-by-step explanation:

the price cap is form of price ceiling

Price ceiling is when the government or an agency of the government sets the maximum price for a product. It is binding when it is set below equilibrium price.

Effects of a binding price ceiling

1. It leads to shortages

2. it leads to the development of black markets

3. it prevents producers from raising price beyond a certain price

4. It lowers the price consumers pay for a product. This increases consumer surplus