If a Good Is Subject to a Binding Price Floor

question 131

Multiple Choice

If a good is subject to a binding price floor and someone purchases it on the black market,what would he or she expect to happen to the price over time?

• A) The black market price will rise over time as the supply curve becomes more elastic and the demand curve becomes more inelastic.
• B) The black market price will fall over time as both the supply and demand curves become more inelastic.
• C) The black market price will rise over time as the demand curve becomes more elastic and the supply curve becomes more inelastic.
• D) The black market price will fall over time as both the supply and demand curves become more elastic.
• E) The black market price will not change over time.

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Definitions:

Hong Kong Dollars

The officially recognized money in Hong Kong, known as HKD.

Forward Rate

The future interest rate agreed upon in a forward contract or derived from a forward curve, representing yield on a future investment period.

Required Rate

The minimum expected rate of return on an investment that an investor demands, taking into account the risk level of the investment.

International Projects

Ventures or operations undertaken by businesses or organizations that involve cross-border investments and activities.