If penalties are imposed on the sellers of illegal goods or services, then the equilibrium price _and the equilibrium quantity _. A. rises; increases B. rises; decreases C. falls; increases D. falls; decreases
If penalties are imposed on the sellers of illegal goods or services
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The correct answer is B. rises; decreases.
When penalties are imposed on sellers of illegal goods or services, the supply of these goods typically decreases due to the risk associated with selling them. With a decreased supply, the equilibrium price rises because the remaining sellers can charge more. At the same time, the equilibrium quantity decreases because fewer goods are available in the market. This results in a higher price and a lower quantity sold.