What Is the Incentive to Create a Black Market When

question 130

Multiple Choice

What is the incentive to create a black market when a binding price ceiling exists?

• A) A black market emerges because sellers have a surplus that they need to sell.
• B) A black market emerges because sellers want a market where they can sell lower-quality products.
• C) A black market emerges because sellers want a market where they can sell higher-quality products at higher prices.
• D) A black market does not emerge because sellers are content to sell at the lower price.
• E) A black market emerges because buyers who have a low opportunity cost are seeking out the product.

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Definitions:

Limited Partnership

A business structure where one or more general partners manage the business and are personally liable for business debts, while one or more limited partners contribute capital and have limited liabilities to the extent of their investment.

Sole Proprietor

A business owned and managed by one individual where there is no legal distinction between the owner and the business entity.

Creditor

An individual or entity to whom money or its equivalent is owed by another individual or entity, known as the debtor.

Professional Corporation

Identical to a business corporation in most respects. A professional corporation is formed by filing with the secretary of state, and it is managed by a board of directors, unless a statute permits it to be managed like a partnership. The rigid management structure makes the professional corporation inappropriate for some smaller professional practices.