11
Copyright © 2011 Pearson Education, Inc.
28) One of the consequences of a rent ceiling set below the equilibrium rent is
A) decreased search activity.
B) increased search activity.
C) the establishment of landlord unions.
D) surpluses of apartments.
E) the elimination of the deadweight loss that would otherwise exist in the housing market.
Skill: Level 2: Using definitions
Section: Checkpoint 7.1
Author: JC
AACSB: Reflective thinking
29) The opportunity cost of an apartment in a rent controlled market is equal to
A) the rent charged for the apartment.
B) the opportunity cost of searching for the apartment.
C) the rent charged for the apartment plus the opportunity cost of searching for the apartment.
D) nothing because of the surplus of apartments when there are rent controls.
E) the rent charged for the apartment minus the opportunity cost of searching for the apartment.
Skill: Level 2: Using definitions
Section: Checkpoint 7.1
Author: JC
AACSB: Reflective thinking
30) A rent ceiling in a housing market
A) makes all rents lower than the ceiling illegal to charge.
B) is set above the equilibrium rent in order to have an effect.
C) increases the time people spend searching for housing.
D) Both answers B and C are correct.
E) Both answers A and C are correct.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: SA
AACSB: Reflective thinking
12
Copyright © 2011 Pearson Education, Inc.
31) In a housing market with a rent ceiling below the equilibrium rent, apartment seekers spend
more time searching for an apartment than they would in a housing market without a rent ceiling.
Why does this difference exist?
A) In the market with the rent ceiling, renters are searching for the best buy in apartments.
B) In the market with the rent ceiling, there is a wide variety in the quality of apartments for rent.
C) In the market with the rent ceiling, the quantity of housing demanded is greater than quantity
supplied at the ceiling price.
D) The premise of the question is incorrect because people spend less time searching with a rent
ceiling since they no longer need to look for a low-priced apartment.
E) The premise of the question is incorrect because there is no difference in the search time
between a market with a rent ceiling and one without a ceiling.
Skill: Level 2: Using definitions
Section: Checkpoint 7.1
Author: TS
AACSB: Reflective thinking
32) In a market with a rent ceiling set below the equilibrium rent, the producer and consumer
surplus
A) both increase.
B) both decrease but generally not to zero.
C) do not change.
D) are eliminated.
E) are both totally converted into deadweight loss.
Skill: Level 2: Using definitions
Section: Checkpoint 7.1
Author: JC
AACSB: Reflective thinking
13
Copyright © 2011 Pearson Education, Inc.
33) Which of the following decrease the deadweight loss from a rent ceiling set below the
equilibrium rent?
i. lowering the ceiling
ii. dedicating more resources to enforcement of the ceiling
iii. raising the ceiling
A) i only
B) ii only
C) iii only
D) i and ii
E) ii and iii
Skill: Level 4: Applying models
Section: Checkpoint 7.1
Author: SB
AACSB: Analytical reasoning
34) People who benefit from a rent ceiling include
A) all landlords.
B) taxpayers.
C) tenants who have a rent-controlled apartment.
D) potential tenants, that is, people looking for apartments.
E) all landlords and some tenants.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: SB
AACSB: Reflective thinking
35) When a rent ceiling below the equilibrium rent is put in place, the outcome is
A) efficient because marginal benefit equals marginal cost.
B) inefficient because marginal benefit equals marginal cost.
C) inefficient because marginal benefit is greater than marginal cost.
D) inefficient because marginal benefit is less than marginal cost.
E) efficient because marginal benefit is greater than marginal cost.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: SB
AACSB: Reflective thinking
14
Copyright © 2011 Pearson Education, Inc.
36) Assuming that the rent ceiling is strictly enforced so that there is no black market, which of
the following statements about a housing market with a rent ceiling set below the equilibrium
rent is correct?
A) The rent for housing equals the ceiling rent or higher.
B) There is excess supply of housing.
C) The rent ceiling increases the amount of producers’ surplus.
D) The rent ceiling creates a deadweight loss.
E) The rent ceiling enforces efficiency upon the housing market.
Skill: Level 2: Using definitions
Section: Checkpoint 7.1
Author: TS
AACSB: Reflective thinking
37) The deadweight loss in a housing market with a rent ceiling set below the equilibrium rent is
the
A) loss to those who cannot find apartments and the gain to landlords who charge black market
rents.
B) loss to those who cannot find apartments and the loss to landlords who cannot offer housing
at the lower rent ceiling.
C) loss to landlords and the gain to tenants who pay a fairer rent.
D) loss to tenants and the gain to landlords who have the incentive to offer more apartments for
rent.
E) gain to landlords and to tenants because now a fairer rent is charged.
Skill: Level 2: Using definitions
Section: Checkpoint 7.1
Author: JC
AACSB: Reflective thinking
15
Copyright © 2011 Pearson Education, Inc.
38) Rent ceilings set below the equilibrium rent
i. create a deadweight loss.
ii. increase search activity.
iii. encourage landlords to charge a high price for new locks and keys, called “key money.”
A) i only.
B) ii only.
C) i and iii.
D) i and ii.
E) i, ii, and iii.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: SA
AACSB: Reflective thinking
39) The deadweight loss from a rent ceiling below the equilibrium rent is smallest when the
supply of housing is
A) perfectly elastic.
B) elastic but not perfectly elastic.
C) unit elastic.
D) inelastic but not perfectly inelastic.
E) perfectly inelastic.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: MR
AACSB: Analytical reasoning
16
Copyright © 2011 Pearson Education, Inc.
40) The above figure shows the market for 2 bedroom townhomes in San Diego. If a rent ceiling
is set at $1,000 per month then there is a
A) surplus equal to 150,000 townhomes.
B) shortage equal to 100,000 townhomes.
C) surplus equal to 100,000 townhomes.
D) shortage equal to 150,000 townhomes.
E) shortage equal to 250,000 townhomes.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: KG
AACSB: Analytical reasoning
41) The above figure shows the market for 2 bedroom townhomes in San Diego. If a rent ceiling
is set at $1,000 per month, what is true?
A) The quantity of townhomes demanded decreases to 100,000.
B) Black market rents might be as high as $1,300 per month.
C) The quantity of townhomes supplied increases to 250,000.
D) More townhomes are rented after the rent ceiling that before.
E) The quantity demanded of townhomes is less than the quantity supplied.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: KG
AACSB: Analytical reasoning
17
Copyright © 2011 Pearson Education, Inc.
42) The above figure shows the market for 2 bedroom townhomes in San Diego. If a rent ceiling
is set at $1,000 per month, what is the maximum rent someone is willing to pay in the black
market?
A) $1,300 per month
B) $1,000 per month
C) $900 per month
D) $1,100 per month
E) $1,400 per month
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: KG
AACSB: Analytical reasoning
43) The above figure shows the market for winter jackets. In an effort to keep the nation warm,
the president places a price ceiling of $100 in the market for winter jackets. As a result, there is
a
A) shortage equal to 150,000 jackets.
B) surplus equal to 150,000 jackets.
C) surplus equal to 300,000 jackets.
D) shortage equal to 250,000 jackets.
E) shortage equal to 100,000 jackets.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: KG
AACSB: Analytical reasoning
18
Copyright © 2011 Pearson Education, Inc.
44) The above figure shows the market for winter jackets. In an effort to keep the nation warm,
the president places a price ceiling of $100 in the market for winter jackets. Which of the
following statements is true?
A) After taking account of the resources lost in search, consumer surplus increases when the
price ceiling is in place.
B) There will be a surplus of jackets.
C) Because the price of a jacket is lowered, consumers end up buying more jackets with the price
ceiling than without it.
D) Producer surplus decreases if there is a price ceiling.
E) The quantity supplied of jackets is greater that quantity demanded when there is a price
ceiling.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: KG
AACSB: Analytical reasoning
45) The above figure shows the market for winter jackets. In an effort to keep the nation warm,
the president places a price ceiling of $100 in the market for winter jackets. What would be the
maximum price someone would pay in the black market?
A) $100 per jacket
B) $120 per jacket
C) $130 per jacket
D) $90 per jacket
E) $140 per jacket
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: KG
AACSB: Analytical reasoning
19
Copyright © 2011 Pearson Education, Inc.
46) The above figure shows the market for winter jackets. In an effort to keep the nation warm,
the president places a price ceiling of $100 in the market for winter jackets. When the price
ceiling is in place and taking account of the resources lost in search, consumer surplus ________
and producer surplus ________ compared to the equilibrium before the price ceiling was
imposed.
A) decreases; increases
B) decreases; decreases
C) increases; increases
D) increases; decreases
E) does not change; increases
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: KG
AACSB: Analytical reasoning
47) The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure,
after taking account of the resources lost in search, what area is equal to the consumer surplus?
A) area A
B) area B
C) area C
D) area D
E) area E
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: KG
AACSB: Analytical reasoning
20
Copyright © 2011 Pearson Education, Inc.
48) The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure,
what area is equal to the producer surplus?
A) area A
B) area B
C) area C
D) area D
E) area E
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: KG
AACSB: Analytical reasoning
49) The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure,
what area is equal to the deadweight loss?
A) area A
B) area B
C) area C
D) area D
E) area E
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: KG
AACSB: Analytical reasoning
50) The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure,
what area is equal to the resources lost due to search?
A) area A
B) area B
C) area C
D) area D
E) area E
Skill: Level 3: Using models
Section: Checkpoint 7.1
Author: KG
AACSB: Analytical reasoning