Which of the following is an accurate statement about the consequence of a binding price floor?
A) Binding price floors do not allow sellers to receive a higher price if they sell the product in the legal market.
B) Binding price floors encourage the formation of a black market.
C) Binding price floors discourage the formation of a black market.
D) Binding price floors create a shortage of the product.
E) Binding price floors cause consumers to want to purchase more of the product in the legal market.

Question

Quizplus · Accepted Answer

Binding price floors, set above the equilibrium price, lead to a surplus of the product because the price is too high for consumers to purchase all of the supply. This surplus can encourage the formation of a black market where the product is sold at a lower price.

Which of the Following Is an Accurate Statement About the Consequence