Rent ceilings set below the equilibrium rent
i.create a deadweight loss.
ii.increase search activity.
iii.result in a surplus of apartments.
A) i only
B) ii only
C) i and iii
D) i and ii
E) i, ii, and iii

Question

Quizplus · Accepted Answer

Rent ceilings set below the equilibrium rent create a deadweight loss because they result in a shortage of housing units, which means that some people who are willing to pay the equilibrium price for housing cannot find an apartment. This results in a loss of economic efficiency because some mutually beneficial transactions are not taking place. Additionally, rent ceilings increase search activity as more people will be in search of apartments due to decreased prices.

Rent Ceilings Set Below the Equilibrium Rent