When a Production Quota Is Used to Remedy the Problem

question 60

Multiple Choice

When a production quota is used to remedy the problem of the commons, then

• A)the production quota is set so that use of the resource is where marginal private benefit equals marginal cost.
• B)the production quota is set so that use of the resource is where marginal private benefit equals marginal social benefit.
• C)the market equilibrium, but not the efficient outcome, is achieved.
• D)all users of the resource have an incentive to cheat on the production quota.
• E)the production quota is set so that marginal social benefit is maximized.

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Definitions:

Reference Groups

Social groups that individuals use as a standard for evaluating their own behavior, attitudes, and values.

Marketers

Professionals involved in identifying customer needs and promoting, selling, and distributing goods or services to meet those needs.

Social Loafing

The phenomenon where individuals exert less effort when working in a group than when working alone, due to reduced accountability or motivation.

Risky Decision

involves making choices under conditions of uncertainty, where the outcomes may include potential losses or gains.