Question 2 (1 point) 1,400 1,200 Price of 1,000 apartments (dollars per month) 6

Question

Question 2 (1 point) 1,400 1,200 Price of 1,000 apartments (dollars per month) 600 400 200 D1 10 20 40 Quantity of apartments (thousands per year) Prior to the increase in demand, the government imposes a price ceiling to keep the price of apartments at $600 per month. When demand increases from D1 to D2, A) a shortage of apartments will develop B) landlords will not be able to rent all their apartments C) contractors will build new apartment complexes D) the opportunity cost of locating an apartment will fall to zero

Explanation / Answer

Question 2: A) a shortage of apartments will develop
This is because there is a price ceiling of $600 which means landlords can not charge a price higher than $600. As demand increases, equilibrium price changes but the price which can be charged remains the same, i.e., $600 so now demand exceeds supply at $600 and D2. Thus, there is a shortage of apartments.

Question 3 B) Reduced crime and better public transportation attract new residents to the city
(Demand will increase when new residents enter the city and they will need a shelter so demand for apartments will increase. For all the other given reasons, demand will not increase)

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