In a Crowded City Far Away, the Civic Authorities Decided

In a crowded city far away, the civic authorities decided that rents were too high. The long-run supply function of two-room rental apartments was given by q = 18 + 3p and the long-run demand function was given by q = 267 - 4p, where p is the rental rate in crowns per week. The authorities made it illegal to rent an apartment for more than 27 crowns per week. To avoid a housing shortage, the authorities agreed to pay landlords enough of a subsidy to make supply equal to demand. How much would the weekly subsidy per apartment have to be to eliminate excess demand at the ceiling price?

A) 40 crowns
B) 10 crowns
C) 17 crowns
D) 20 crowns
E) 30 crowns

Correct Answer:

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