Which of the following is an accurate statement about the consequence of a binding price ceiling?
A) Binding price ceilings do not allow consumers to pay a lower price for the product in the legal market.
B) Binding price ceilings encourage the formation of a black market.
C) Binding price ceilings discourage the formation of a black market.
D) Binding price ceilings create a surplus of the product.
E) Binding price ceilings cause consumers to purchase more of the product in the legal market.

Question

Quizplus · Accepted Answer

A binding price ceiling sets a price limit below the equilibrium price, causing a shortage of the product. This shortage encourages consumers to turn to the black market to obtain the product at a higher price, often while sacrificing quality or safety standards. Therefore, binding price ceilings encourage the formation of a black market.

Which of the Following Is an Accurate Statement About the Consequence