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:

Pure Monopoly

A market structure characterized by a single seller producing a unique product with no close substitutes and high barriers to entry.

Interindustry Competition

Competition that occurs between companies in different industries or sectors offering substitute goods or services.

Oligopolistic Industries

Market structures characterized by a small number of firms that dominate the industry, leading to competition primarily on factors other than price, such as innovation or advertising.

Product Price

The amount of money required to purchase a good or service, determined by factors such as production costs, demand, and supply.