Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A decrease in the quantity of available rental units leading to a housing shortage
B
An increase in the overall welfare of renters without any adverse effects
C
A rise in property values that benefits landlords
D
A temporary boost in construction of new housing units
Understanding the Answer
Let's break down why this is correct
Answer
When a local government sets a price ceiling on rent, it means they limit how much landlords can charge for housing. While this can make rent more affordable for some people, it can also lead to problems. For example, if the rent is too low, landlords might not want to maintain their buildings or might even decide to sell their properties instead of renting them out. This could result in fewer available apartments and poorer living conditions, which means that the actual number of homes rented out may be less than what is socially optimal. In this way, the price ceiling can create a mismatch between what people need and what is available, leading to inefficiencies in the housing market.
Detailed Explanation
When the government sets a limit on how much rent can be charged, landlords may not want to rent out their properties. Other options are incorrect because Some might think that limiting rent will always help renters without problems; It's a common belief that price limits will raise property values for landlords.
Key Concepts
Socially Optimal Output
Market Inefficiencies
Government Intervention
Topic
Socially Optimal Output vs. Actual Output
Difficulty
medium level question
Cognitive Level
understand
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