Suppose that the average equilibrium monthly rental price of apartments and rooms in a college town had been steady at 600, but then the college expanded enrollment from 10,000 to 12,000 . Suddenly there is a shortage of rental housing at the prevailing price of 600 . Which of the following is most likely to be true?
a. The shortage occurred because demand increased, and a new market equilibrium will result in higher rental prices and more rental units available on the market.
b. The shortage occurred because supply increased, and a new market equilibrium will result in lower rental prices and fewer rental units available on the market.
c. The shortage occurred because demand decreased, and a new market equilibrium will result in lower rental prices and fewer rental units available on the market.
d. The shortage occurred because demand increased, and a new market equilibrium will result in higher rental prices and fewer rental units available on the market.
Question 2
At the equilibrium price, deadweight loss is minimized.
a. True
b. False
Indicate whether the statement is true or false
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