-Refer to the above figure. A price ceiling has been set at P1, and a black market has opened. The equilibrium black market price will be
A) below P1.
B) between P1 and P3.
C) above P3.
D) P2.

Question

-Refer to the above figure. A price ceiling has been set at P1, and a black market has opened. The equilibrium black market price will be
A) below P1. 
B) between P1 and P3. 
C) above P3. 
D) P2.

Quizplus · Accepted Answer

A price ceiling set at P1 creates a shortage as the quantity demanded exceeds the quantity supplied at that price, leading to a black market. In the black market, prices typically rise above the ceiling (P1) but do not exceed the equilibrium price (P3) where supply and demand would naturally meet without price controls.

-Refer to the Above Figure