A Production Quota Is Set Below the Equilibrium Quantity

question 54

Multiple Choice

A production quota is set below the equilibrium quantity. At the quota quantity, marginal social benefit is ________ marginal social cost and the level of production is ________.

• A)less than; efficient
• B)greater than; efficient
• C)less than; inefficient
• D)equal to; efficient

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Definitions:

Marginal Cost

The augmentation in cumulative costs linked with generating an extra unit of a product or service.

Average Cost

The overall expense of manufacturing split by the quantity of units made.

Rate of Return

The increase or decrease in value of an investment throughout a determined period, shown as a percent of the investment’s initial cost.

Natural Monopolies

A market situation where a single supplier, due to unique resources, technology, or economies of scale, can provide a product or service at a lower cost than any potential competitor.