Everyone hides the'Lr preferences for the good hoping someone else will foot the bill. Thus, an insufficient quantity of the good is provided by the market. Briefly discuss why the cost of drugs is likely to increase and the demand for drugs is likely to decrease in the face of prohibition. Like any cartel, the drug cartel will restrict output in an effort to maximize profits. This will decrease quantity and drive up price.
Risk also works to increase the cost of the drug.
This risk arises from two sources. First, there is the risk of prosecution associated with supplying an illegal drug. Because no property rights are associated with the drug, territories for selling are often won through bloody street wars. Further, there is no protection if someone wishes to steal the drug from you. Each deal to sell carries with it the possibility of being shot in order for the buyer to obtain what he or she wants.