When a rent ceiling below the equilibrium rent is put in place,the outcome is
A) efficient because marginal benefit equals marginal cost.
B) inefficient because marginal benefit equals marginal cost.
C) inefficient because marginal benefit is greater than marginal cost.
D) inefficient because marginal benefit is less than marginal cost.
E) efficient because marginal benefit is greater than marginal cost.

Question

Quizplus · Accepted Answer

Rent ceilings set below the equilibrium rent create a shortage, leading to a situation where the marginal benefit of renting an apartment (what people are willing to pay) exceeds the marginal cost (the rent controlled price). This discrepancy indicates inefficiency because not all mutually beneficial transactions are occurring.

When a Rent Ceiling Below the Equilibrium Rent Is Put