Setting a Production Quota Does Not Always Achieve the Efficient

question 77

Multiple Choice

Setting a production quota does not always achieve the efficient use of a common resource because

• A)marginal cost differs for each producer and it is in everyone's self-interest to cheat and produce more than the assigned quota.
• B)the marginal private benefit from a production quota is zero.
• C)marginal cost differs for each producer and the marginal social benefit from a production quota is zero.
• D)a production quota does not totally eliminate the problem of free-ridership of a common resource.
• E)the Coase theorem is invalid in this market.

---

Definitions:

Nominal Terms

Values or figures that have not been adjusted for inflation, representing current prices or values.

Treasury Bills

Short-term U.S. government debt obligations with maturities of one year or less, considered a safe and liquid investment.

Optimal Weights

The proportion of each asset in a portfolio that maximizes its expected return for a given level of risk.

Expected Rate

Typically refers to the rate of return anticipated on an investment or project, based on projections or historical data.