From an efficiency standpoint, rent controls:
A) increase efficiency by allowing those households who could not afford high rents before to be able to purchase housing.
B) increase efficiency by increasing consumer surplus.
C) decrease efficiency because both buyers and sellers would be better off if the price of rents were allowed to rise.
D) decrease efficiency because they make it illegal to trade.

Question

Quizplus · Accepted Answer

Rent controls decrease efficiency because they prevent the market from reaching equilibrium, which causes shortages in rental units and reduces investment in new construction. This results in a misallocation of resources and potential deadweight loss. Both buyers and sellers would be better off if the market were allowed to determine the price of rents.

From an Efficiency Standpoint, Rent Controls