If Buyers of Illegal Goods Are Punished but Sellers Are

question 49

Multiple Choice

If buyers of illegal goods are punished but sellers are not, then the price ________ and the equilibrium quantity ________.

• A) rises; increases
• B) rises; decreases
• C) falls; increases
• D) falls; decreases

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Definitions:

Direct Materials Cost

The expense of raw materials and components directly used in the production of a product.

Sales

The activities involved in selling products or services, including marketing, negotiation, and transaction processes.

Desired Profit

The amount of net income that a company aims to achieve within a specific period.

Contribution Margin Ratio

The contribution margin ratio is a financial metric that measures the proportion of revenue that exceeds total variable costs, indicating how much of each sale contributes to covering fixed costs.