Which of the following is a correct statement about markets for prohibited goods?

Question

Quizplus · Accepted Answer

All the statements are correct regarding markets for prohibited goods. Penalizing either buyers or sellers decreases the quantity bought because it increases the costs associated with the transaction, thereby reducing demand or supply. Penalizing sellers directly affects supply by making it riskier or more expensive to provide the good, while penalizing buyers affects demand by making it riskier or more expensive to purchase the good. Taxing a good at a high rate can indeed reduce consumption to levels similar to outright prohibition by making the good prohibitively expensive, thus decreasing demand.

Which of the Following Is a Correct Statement About Markets