Part 1What is a rent ceiling and what are its effects if it is set above the equilibrium rent? Part 1A rent ceiling is _______. A. a price floor in the housing market B. the opportunity cost of renting an apartment C. a government regulation that makes it illegal to charge a rent higher than a specified level D. the mechanism that eliminates search activity in the market for low-income housing

Question

Part 1What is a rent ceiling and what are its effects if it is set above the equilibrium​ rent? Part 1A rent ceiling is​ _______. A. a price floor in the housing market B. the opportunity cost of renting an apartment C. a government regulation that makes it illegal to charge a rent higher than a specified level D. the mechanism that eliminates search activity in the market for​ low-income housing

BlackTom AI · Accepted Answer

Understanding the concept being tested helps unpack each option.
Option A: 'a price floor in the housing market' is incorrect because a price floor is a minimum price set above equilibrium to prevent prices from falling, whereas a rent ceiling is a maximum price set below or at equilibrium to limit how high rents can rise.
Option B: 'the opportunity cost of renting an apartment' is not an accurate description of a rent ceiling. Opportunity cost refers to the value of the next-best alternative foregone, not a regulatory price limit on rents.
Option C: 'a government regulation that makes it illegal to charge a rent higher than a specified level' correctly identifies a rent ceiling as a legal cap on rents, i.e., a maximum allowable rent set by policy.
Option D: 'the mechanism that eliminates search activity in the market for low-income housing' mischaracterizes a rent ceiling. While ceilings can distort markets and affect search behavior, they do not function as a mechanism that eliminates search activity; other factors influence search intensity.
In summary, option C accurately captures the definition of a rent ceiling as a government-imposed limit on how high rents can be charged, whereas the other choices describe concepts that do not align with the standard definition of a rent ceiling.

Homework:ch6_homework

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