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:

Direct Labour Budget

A budget that forecasts the expense of direct labor needed to achieve manufacturing targets.

Labour Rate

The standard or actual cost paid per hour of labor, used in calculating the total cost of production or services.

Raw Materials

Materials that are used to make a product.

Budgeted Production

The planned quantity of goods or services that a company aims to produce over a certain period, often based on forecasted demand.