Black Markets May Develop as a Result of Price Controls

question 60

Multiple Choice

Black markets may develop as a result of price controls because:

• A) price controls increase efficiency.
• B) quantity demanded equals quantity supplied at the mandated price.
• C) individuals cannot profit by illegal exchanges.
• D) individuals can profit by illegal exchanges.

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Definitions:

EBIT

A measure of a firm's profit that disregards expenses from interest and income taxes, termed as Earnings Before Interest and Taxes.

ROE

Return on Equity, a financial ratio indicating the profitability of a business in relation to its equity, measuring how effectively investment funds are utilized.

Fixed Costs

Regardless of how much is produced or sold, certain costs like rent, employee salaries, and insurance payments do not vary.

Variable Costs

Expenses that change in proportion to the activity of a business.