When a Quota Is Imposed on a Market with a Negative

question 131

Multiple Choice

When a quota is imposed on a market with a negative externality, the market is:

• A)efficient, because consumption occurs at the efficient level.
• B)not efficient, because the net benefits individuals receive from the amount set by the quota are different.
• C)efficient, because the net benefits individuals receive from the amount set by the quota are equal.
• D)not efficient, because the marginal cost outweighs the marginal benefit for too many consumers.

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Definitions:

Maintenance Agreement

A contract between a service provider and a customer outlining the terms for the maintenance and repair of equipment over a specified period.

Implicit Lease Rate

The interest rate embedded in a lease agreement that equates the value of lease payments to the fair value of the leased asset.

Incremental Borrowing Rate

The interest rate a lessee would have to pay if, instead of leasing, they financed the purchase of an asset with a loan over a similar term.

Implicit Rate Of Interest

The interest rate embedded in a lease agreement, used to calculate the present value of lease payments and to establish the lease classification.