Use the concept of economic rent to explain how rent controls could have an effect quite opposite to the intention.
What will be an ideal response?
Only economic rent can be taxed away without reducing the quantity of the input supplied. A building owner cannot expect to earn economic rent because too many other potential owners whose costs of construction are roughly the same will also offer apartments if rents are high. If the market price temporarily included some economic rent other builders would start new construction that would drive the price down. Thus buildings come rather close to being in perfectly elastic supply. This means that builders and owners of buildings cannot collect economic rent in the long run. Because apartment owners collect very little economic rent, payments by tenants in a free market must be just enough to keep those apartments on the market. If rent controls push these prices down, the apartments will start disappearing from the market. Among other unfortunate results, we can therefore expect rent controls to contribute to homelessness.
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Suppose there are three power-generating plants, each of which has access to 5 different production processes. The table below summarizes the cost of each production process and the corresponding number of tons of smoke emitted each. Process(smoke/day) A(4 tons/day) B(3 tons/day) C(2 tons/day) D(1 ton/day) E(0 tons/day) Cost to Firm X ($/day) $500$514$530$555$585 Cost to Firm Y ($/day) $400$420$445$480 $520Cost to Firm z ($/day) $300$325$360$400 $550It would cost Firm X ________ to reduce emissions by one ton if it currently emits 3 tons, and ________ to reduce emissions by one ton if it currently emits 2 tons.
A. $14; $25 B. $14; $16 C. $30; $55 D. $16; $25
For a given domestic and foreign price level, an increase in the nominal exchange rate ________ the real exchange rate.
A. offsets any change in B. may either increase or decrease C. increases D. decreases
A good produced in 2009 and held in inventory until it is sold in 2010 would be included in which measure of GDP?
a. Half the value in 2009 and half the value in 2010 b. In 2010 GDP c. In both 2009 and 2010 GDP d. In 2009 GDP
Billy is deciding whether to watch TV at home or go spend time with his friends. If Billy decides to stay home, we can conclude that:
A. Billy will get more utility from watching TV than spending time with his friends. B. Billy's revealed preference is to always be alone. C. Billy is a homebody and never goes out. D. Billy will regret not spending more time with his friends.