Asked by Xitlaly Vicuna on May 08, 2024
Verified
A price ceiling on a good often results in:
A) a black market,or underground transactions of the good.
B) a surplus of the product.
C) more communication between buyers and sellers about the appropriate price.
D) a more efficient allocation of the good to buyers.
Price Ceiling
A legal maximum price that can be charged for a good or service, above which it cannot be sold.
Black Market
The black market is an illegal trade of goods and services, operated outside of the lawful economic frameworks and regulations.
Underground Transactions
Economic activities that occur outside of the formal economy and are not reported to government agencies, often to avoid taxes or regulation.
- Familiarize yourself with the effects that price regulations, like ceilings and floors, exert on the harmonization of market activities.
- Discuss the potential for black markets as a result of stringent price controls and quotas.
Verified Answer
JB
Jason BrownMay 10, 2024
Final Answer :
A
Explanation :
A price ceiling creates a situation where the price of a good is set below the market equilibrium, leading to a shortage of the good. This shortage creates an incentive for buyers and sellers to engage in black market transactions to obtain the good at a higher price.
Learning Objectives
- Familiarize yourself with the effects that price regulations, like ceilings and floors, exert on the harmonization of market activities.
- Discuss the potential for black markets as a result of stringent price controls and quotas.