I think that the problem with selling mixed breed puppies goes far beyond "what the market will bear." All breeders, but especially show/hobby breeders are taking a major hit right now because of the number of dogs in shelters; however, the people who breed purebred dogs for show are typically careful about what they produce and to whom they sell. It's very rare that responsible show/hobby breeders' puppies end up in shelters, since the vast majority of them will take a "puppy" back if the owner can't keep it, no matter what the age of the dog. Many people who purchase purebred puppies will not consider purchasing any other kind of dog and probably will not consider going to the shelter for a mixed breed, since they want a dog that was bred for a specific purpose. They are not condemning a puppy in a shelter to death by purchasing a purebred, since to them a shelter dog was never an option.
However, people who breed mixed breeds and sell them under cute names are causing immeasurable harm to the shelter system. For every cute "Bug" or "Taco Terrier" that is sold for $500 to $2000, there is a beagle mix or chihuahua mix that never makes it out of the shelter. *That* is direct cause and effect--people will always what they see as "status" or "quality" over "common" or "unknown." They reassure themselves that it's better to spend the money on a dog for whom they "know the parents" than something that has no known quantities behind it. I am not a fan of more regulations when it comes to animals, but it would be wonderful if the people writing the anti-breeding legislation would go after the people mixing breeds and not after the people who are trying to breed and sell healthy well-bred dogs.
