Homework Answers
Valid options:
- Black market
- Inefficient allocation of apartments
- More subletting of apartments
- Reductions in apartment quality
Explanation: In rent control, the upper limit of rent is fixed and the rent cannot go over it. Therefore, the quantity supplied is lower than the quantity demanded. So, there is a shortage of apartments. This leads to black market. Also, many tenants sublet the apartments at a higher price. Also, owners have less incentive to maintain the apartments. Overall, rent control reduces market efficiency.
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