Suppose that the government imposes a price ceiling on gasoline that is below the equilibrium price.The black market for gasoline is ________ market in which the price ________ ceiling price.
A) a legal; exceeds the
B) an illegal; exceeds the
C) a legal; is less than the
D) an illegal; is less than the
E) an illegal; equals

Question

Quizplus · Accepted Answer

A price ceiling that is below the equilibrium price creates excess demand or a shortage of gasoline, causing buyers to turn to the black market to fulfill their needs. The black market is an illegal market, and the price at which gasoline is sold on the black market exceeds the ceiling price. Therefore, the correct choice is B, an illegal market in which the price exceeds the ceiling price.

Suppose That the Government Imposes a Price Ceiling on Gasoline