Suppose that there are 5 apartments to be rented and that the city rent-control board sets a maximum rent of $9. Further suppose that people A, B, C, D, and E manage to get an apartment, while F, G, and H are frozen out.
(a) If subletting is legal—or, at least, practiced—who will sublet to whom in equilibrium? (Assume that people who sublet can evade the city rent-control restrictions.)
(b) What will be the maximum amount that can be charged for the sublet payment?
(c) If you have rent control with unlimited subletting allowed, which of the consumers described above will end up in the 5 apartments?
(d) How does this compare to the market outcome?