Consider the Market for Any Agricultural Commodity for Which There

question 72

Multiple Choice

Consider the market for any agricultural commodity for which there exists a binding output quota and demand is inelastic.One outcome of this situation is that

• A)the price and quantity adjust back to the free-market equilibrium levels.
• B)producers who were in this industry before the introduction of the quota are harmed.
• C)producers leave this industry because total revenues fall as a result of the the quota.
• D)it is difficult for new producers to enter this industry because the quotas are very expensive.
• E)producers who enter this industry after the introduction of the quota benefit.

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Definitions:

Externality

A consequence of an economic activity experienced by unrelated third parties; it can be either positive or negative.

Precision-estimates

The accuracy of an estimate in terms of how closely it predicts the actual value, often relevant in statistical analyses and forecasting.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Investment Project

A project or activity that involves spending capital with the expectation of future financial returns.