In a free market for rental housing, the average rental rate

Question

Quizplus · Accepted Answer

The rental rate in a free market for rental housing includes some economic rent. Economic rent refers to the excess amount paid for a factor of production, in this case, rental housing, above what is necessary to keep it in its current use. Because rental housing is not fixed in supply in the long run, there is room for competition among landlords, which can drive down the rental rate and reduce the amount of economic rent. However, in the short run, with fixed rental housing, landlords may be able to charge more than the necessary cost of maintaining and operating the housing units, resulting in some economic rent.

In a Free Market for Rental Housing, the Average Rental