Question

When the government imposes a binding rent control, it

A) hurts tenants in the short run, but benefits them in the long run

B) benefits tenant in short run and long run

C) benefits tenants in the short run, but hurts them in the long run

D) hurts tenant in the short run and long run

Answer 1

When the government imposes a binding rent control then it hurts tenants in the short run and long run.

In the short run due to price control ine number of landlord will exit from the market since they unable to cover their cost.

In the short run it creates shortage in the market and opens a parallel black market economy. In the long run when the tenants have got more time to adjust will further complicate the market it reduces the affordability.

Option D.