Suppose that the City of Arcata, California, imposes rent control so that rents cannot exceed $500 per month on one bedroom rental units. Suppose that $500 had also been the equilibrium rental price in Arcata before a huge new apartment complex was built in the nearby town of McKinleyville, where rents are $400 per month. Which of the following is most likely to be true?

a. There will be a lasting surplus of rental housing in Arcata after the new apartment complex is built in McKinleyville.
b. There will be a shortage of rental housing in Arcata at the rent-control price of $500.
c. The equilibrium rental price in Arcata will fall below $500, and thus rent control will not affect the rental market in Arcata.
d. The equilibrium price of $500 per month in Arcata will not change.


c. The equilibrium rental price in Arcata will fall below $500, and thus rent control will not affect the rental market in Arcata.

Economics

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Economics