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Chapter 7 . Government Influences on Markets 107 6. In a housing market with a rent ceiling set below the equilibrium rent, 10. A rent ceiling creates a deadweight loss a. ) some people seeking an apartment to rent a. if it is set below the equilibrium rent. will not be able to find one. b. if it is set equal to the equilibrium rent. b. the total cost of renting an apartment will c. if it set above the equilibrium rent. decrease for all those seeking housing. d. if it decreases the taxes the government c. some landlords will not be able to find collects in the housing market. renters to fill available apartments. e. never, because if it did create a dead- d. search will decrease because renters no weight loss, the government would not longer need to search for less expensive impose it. apartments. Short Response Questions e. None of the above answers are correct be- cause to have an impact the rent ceiling FIGURE 7.2 Price (dollars per purse) must be set above the equilibrium rent. S 7. An effective rent ceiling on housing creates a 50 problem of allocating the available housing ........ units because 40 ... .... a. the demand for housing decreases and the . ........ demand curve shifts leftward. 30 . . . ...... ... .. b. the supply of housing increases and the ........ .........". supply curve shifts rightward. 20 a shortage of apartments occurs. 10 d. a surplus of apartments occurs. e. it eliminates search, which is one of the major ways housing units are allocated. 1,000 2,000 3,000 4,000 5,000 6,000 8. An effective rent ceiling Quantity (purses per month) Ca. increases search activity. 1. Figure 7.2 shows the market for purses. b. results in surpluses. a. What is the equilibrium price and quantity c. creates efficiency. of purses? d. benefits producers. b. Suppose the government imposes a $20 e. must be set below the equilibrium rent. price ceiling. With the price ceiling, what 9. Suppose that the government imposes a is the quantity of purses demanded and price ceiling on gasoline that is below the the quantity of purses supplied? What is equilibrium price. The black market for the shortage? Indicate the shortage in the gasoline is market in which the price figure. the ceiling price. c. The price ceiling creates a deadweight loss. a. a legal; exceeds Show the deadweight loss in the figure. b. an illegal; exceeds c. a legal; is less than d. an illegal; is less than e. an illegal; equals