What is a black market? What types of goods are likely to be traded in a black market? What are the problems that black markets pose in an economy?
What will be an ideal response?
The black market, sometimes referred to as the underground economy, is a non-legal market for regulated goods and services. Black markets could include legal activities where income taxes are not paid, as well as illegal activities, such as drug dealing and prostitution.
When black markets involve goods and services that have been legally banned, the black market undermines the ban. When black market transactions occur in markets for legal goods and services in order to avoid taxes or regulations, they put legitimate businesses at a disadvantage. To compensate for the lost revenue from black markets, governments must levy higher taxes. Criminals involved in the black market spend vast resources trying to elude the law, which is not an effective use of society's resources.
You might also like to view...
Which of the following is a likely outcome of rent ceilings?
A) a surplus of rent-controlled housing B) waiting lists of potential renters of rent-controlled housing C) construction of more rental housing D) black market rents below the ceiling rent
Which of the following statements best expresses a firm's profit-maximizing decision rule?
a. If marginal revenue is greater than marginal cost, the firm should increase its output. b. If marginal revenue is less than marginal cost, the firm should shut down in the short run. c. If marginal revenue equals marginal cost, the firm should produce exactly one more unit of output. d. All of the above are correct.
Basing decisions on marginal cost and marginal benefit means that people should:
A. take no chances. B. weigh the costs and benefits and make the choice that provides the highest net cost. C. weigh the costs and benefits and make the choice that provides the highest net benefit. D. make only Pareto optimal choices.
What is least accurate about the US experience with the income tax?
a. The federal income tax was not used for an extended period until after 1910. b. In the late 1800s and early 1900s, people from the South and West were most likely to support an income tax. c. Increases in the income tax were justified by using the money for more generous army pensions and increased military spending, especially for the US Navy. d. Provisions for the income tax were stated in the US Constitution.