The long-run effects of rent control support one of the five foundations of economics,namely,that
A) people respond to incentives.
B) society faces a trade-off between homelessness and rent control.
C) one must give up something in order to get something else.
D) social planners must think marginally in allocating housing.
E) exchange makes everyone better off.

Question

Quizplus · Accepted Answer

Rent control creates an incentive for landlords to provide fewer rental units and for tenants to stay in their units longer than they otherwise would. This leads to a misallocation of resources and a reduction of overall economic efficiency, supporting the idea that people respond to incentives, which is one of the foundations of economics.

The Long-Run Effects of Rent Control Support One of the Five