Question 50
Price DeterminationA black market can occur when
- A.supply is in excess of demand
- B.consumption of the commodity is restricted
- C.prices are set by government above the equilibrium
- D.prices are set by government below the equilibrium
Show the answer and explanation
Answer: D (prices are set by government below the equilibrium)
Explanation
A maximum price below equilibrium causes shortages, so some buyers pay more illegally: a black market.