What is the incentive to create a black market when a binding price ceiling exists?
A) A black market emerges because sellers have a surplus that they need to sell.
B) A black market emerges because sellers want a market where they can sell lower-quality products.
C) A black market emerges because sellers want a market where they can sell higher-quality products at higher prices.
D) A black market does not emerge because sellers are content to sell at the lower price.
E) A black market emerges because buyers who have a low opportunity cost are seeking out the product.

Question

Quizplus · Accepted Answer

When a binding price ceiling exists, sellers are prohibited from selling their products at the market equilibrium price, which is likely higher than the price ceiling. This creates an incentive for some sellers to sell their products on a black market where they can charge higher prices to buyers seeking higher-quality products. The black market allows sellers to bypass the price ceiling and charge their desired price, which attracts buyers who are willing to pay a premium for higher-quality products. Therefore, option C is the correct answer.

What Is the Incentive to Create a Black Market When