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AICPA CPA-Business Exam - Topic 1 Question 107 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 107
Topic #: 1
[All CPA-Business Questions]

A city ordinance that freezes rent prices may cause:

Show Suggested Answer Hide Answer
Suggested Answer: C

Choice 'c' is correct. Return on investment equals net income divided by average invested capital:

Choices 'a', 'b', and 'd' are incorrect, per the above calculation.


by Emerson at Feb 07, 2025, 08:11 PM

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Dyan
3 months ago
Supply might drop if landlords can't raise rents.
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Lezlie
3 months ago
Wait, how can freezing rent prices cause more demand? Sounds off.
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Rhea
3 months ago
Actually, I think D could happen too.
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Renay
4 months ago
Totally agree, C makes the most sense here.
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Yan
4 months ago
Rent freezes usually lead to higher demand.
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Mirta
4 months ago
I'm not confident, but I think a rent freeze could lead to a situation where supply doesn't meet demand, which points to C as well.
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Bobbye
4 months ago
I feel like I saw a similar question where a price ceiling caused excess demand. So, C seems likely, but I could be wrong.
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Verda
4 months ago
I remember discussing how price controls can create shortages, which sounds like option C again.
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Jolene
5 months ago
I think a rent freeze might lead to more demand, so maybe option C is correct? But I'm not entirely sure.
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Lino
5 months ago
This is a tricky one. I'm not totally confident, but I think the key is understanding how rent control affects the equilibrium in the rental market. I'll need to carefully analyze each answer choice and see which one best describes the likely outcome.
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Ona
5 months ago
Okay, I've got this. Rent control reduces the incentive for landlords to supply rental units, so the supply curve shifts to the left. Meanwhile, the demand for rental units increases as more people want to take advantage of the lower prices. That means the quantity demanded will exceed the quantity supplied.
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Paz
5 months ago
Hmm, I'm a little unsure about this one. I know rent control can cause some distortions in the market, but I'm not totally clear on the specifics. I'll have to review my notes and try to reason through the different options.
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Raymon
5 months ago
This seems like a straightforward question about the effects of rent control. I'll need to think through how rent control impacts the supply and demand for rental space.
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Domitila
9 months ago
I don't know about you, but I'd rather be a landlord than a renter in this scenario. Talk about a captive market!
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Tatum
8 months ago
C) The quantity demanded of rental space exceeds the quantity supplied.
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Gerald
8 months ago
B) The supply curve for rental space to rise.
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Carey
8 months ago
A) The demand curve for rental space to fall.
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Alva
9 months ago
Ah, the old rent freeze conundrum. I'm going to have to go with C on this one. Grab your popcorn and watch the lines for rental space grow!
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Gilbert
10 months ago
This is a tricky one, but I'm going with B. The rent freeze will reduce the incentive for landlords to supply rental space, causing the supply curve to rise.
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Merlyn
8 months ago
I see your point, but I still think B is the best answer. The rent freeze will definitely impact the supply curve.
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Andree
8 months ago
But wouldn't that also mean that the quantity demanded of rental space exceeds the quantity supplied? So maybe it's C?
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Bettye
8 months ago
I think you're right, B makes sense. Landlords won't want to supply as much rental space if they can't increase the rent.
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Wilson
10 months ago
D seems more likely to me. The rent freeze will limit the supply of rental space, causing the quantity supplied to exceed the quantity demanded.
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Nicholle
9 months ago
That makes sense. If there's a rent freeze, landlords may not want to rent out their properties, leading to an excess supply.
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Nicholle
9 months ago
I think D is correct. The rent freeze will definitely limit the supply of rental space.
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Ozell
10 months ago
That's true, it could create a shortage of rental space.
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Tasia
10 months ago
I think the correct answer is C. A rent freeze will cause the quantity demanded to exceed the quantity supplied, leading to a shortage of rental space.
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Margarett
11 months ago
But wouldn't it also lead to the quantity demanded exceeding the quantity supplied?
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Ozell
11 months ago
I think a rent freeze may cause the demand curve to fall.
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