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Suppose the city of Arcata, California, imposes rent control so that rents cannot exceed $1,000 per month on one-bedroom rental units. Suppose $1,000 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 $800 per month. Which of the following is most likely true?
a. There will be a shortage of rental housing in Arcata at the rent control price of $1,000.
b. There will be a lasting surplus of rental housing in Arcata after the new apartment complex is built in McKinleyville.
c. The equilibrium rental price in Arcata will fall below $1,000, and thus rent control will not affect the rental market in Arcata.
d. The equilibrium price of $1,000 per month in Arcata will not change
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Suppose the city of Arcata, California, imposes rent control so that rents cannot exceed $1,000 per...
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