What Is the Incentive to Create a Black Market When

question 10

Multiple Choice

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

• A) A black market emerges because buyers are frustrated with shortages of the product.
• B) A black market emerges because sellers have an incentive to charge a higher price on the illegal market.
• C) A black market emerges because sellers want a market where they can sell higher-quality products.
• D) A black market does not emerge; the price will eventually fall to the equilibrium price.
• E) A black market emerges because sellers need a way to dispose of surplus product.

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Definitions:

Supply Curves

Graphical representations that show the relationship between the price of a good and the quantity of that good that a supplier is willing to supply.

Quantity Purchased

The total number of units of a product bought by consumers at a given price level.

Product Price

The amount of money required to purchase a specific product, determined by various factors including cost of production, demand, and competition.

Demand

The desire to own something and the ability to pay for it, represented by how much of a good or service consumers are willing to buy at different prices.