Black markets occur when price ceilings are imposed in a market.Which of the following explains why sellers participate in a black market?
A) Sellers are able to sell the product for a higher than legal price.
B) There are more buyers in the black market than in the legal market.
C) The demand is perfectly elastic in a black market.
D) There is no good reason why sellers participate in a black market.
E) The demand is perfectly inelastic in a black market.

Question

Quizplus · Accepted Answer

When a price ceiling is imposed, it is below the equilibrium price, causing a shortage in the market. Some sellers see an opportunity to sell their products for a higher price in the black market, where there is no legal restriction on the price. Therefore, they participate in the black market to make more profit.

Black Markets Occur When Price Ceilings Are Imposed in a Market.Which