Black markets may develop with price controls because:
A)price controls increase efficiency.
B)quantity demanded equals quantity supplied at the mandated price.
C)individuals cannot profit by illegal exchanges.
D)individuals can profit by illegal exchanges.

Question

Quizplus · Accepted Answer

When the government imposes price controls, it creates a difference between the market equilibrium price and the price mandated by the government. This leads to either a shortage or a surplus of the product in question. In the case of a shortage, individuals who cannot obtain the product legally may turn to the black market to purchase it at a higher price. This creates an opportunity for individuals to profit by supplying the product illegally, leading to the development of a black market. Thus, option D is the correct choice.

Black Markets May Develop with Price Controls Because