Question

A binding rent-control price ceiling does not result in:
a. Wasted resources of consumers caused by time spent searching for the good.
b. Inefficiently low transaction costs.
c. Inefficient allocation of the good to consumers.
d. Inefficiently high quality of the good being sold.

Answer 1

Answer: d. Inefficiently high quality of the good being sold.

Explanation: a binding price ceiling is the legal maximum that is imposed on a good when the market clearing price is above the ceiling price. This leads to a shortage of goods in the market. Since consumers do not get all they want the ongoing price, it leads to wasted time of the consumers looking for the good, inefficiently low transaction cost and inefficient allocation of goods to the consumers.

However, it does not lead to inefficiently high quality of the good being sold. As quality of good is not linked to the price ceiling.