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:

Sweetener

An additional enticement or incentive provided to make an offer or deal more attractive, often seen in financial agreements.

Private Placements

Loans, usually long term in nature, provided directly by a limited number of investors.

Warrants

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a security—most commonly equity—at a predetermined price before a specified date.

Bonds

Fixed income securities that represent a loan from an investor to a borrower, typically corporate or governmental, with terms including the interest rate and repayment date.