In a Housing Market with a Rent Ceiling Below the Equilibrium

question 78

Multiple Choice

In a housing market with a rent ceiling below the equilibrium rent,apartment seekers spend more time searching for an apartment than they would in a housing market without a rent ceiling.Why does this difference exist?

• A) In the market with the rent ceiling, renters are searching for the best buy in apartments.
• B) In the market with the rent ceiling, there is a wide variety in the quality of apartments for rent.
• C) In the market with the rent ceiling, the quantity of housing demanded is greater than quantity supplied at the ceiling price.
• D) The premise of the question is incorrect because people spend less time searching with a rent ceiling since they no longer need to look for a low-priced apartment.
• E) The premise of the question is incorrect because there is no difference in the search time between a market with a rent ceiling and one without a ceiling.

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Definitions:

Net Present Value

The variance between the current value of cash coming in and the current value of cash going out over a time span.

Discount Rate

The interest rate used in determining the present value of future cash flows or in evaluating the attractiveness of an investment.

Project Cash Flows

The net amount of cash that is generated or expended by a particular project or investment, after accounting for all inflows and outflows.

Project Profitability Index

The ratio of the net present value of a project’s cash flows to the investment required.