Government-Imposed Quantity Restrictions

question 319

Multiple Choice

Government-imposed quantity restrictions

• A) generate a higher price for the good than would prevail under freely competitive markets.
• B) generate a lower price for the good than would prevail under freely competitive markets.
• C) does not affect the price of the good because quantity restrictions always ban sale of the good completely.
• D) can cause prices to either be higher or lower, but always cause excess quantities supplied to develop.

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Definitions:

Hard Rationing

The situation that occurs when a business cannot raise financing for a project under any circumstances.

Hard Capital Rationing

A situation where a company is unable to secure additional funding from external sources like equity or debt markets.

NPV Projects

Projects evaluated using the Net Present Value method, which calculates the difference between the present value of cash inflows and outflows over a period.

Internal Constraints

Limitations within an organization that restrict its ability to achieve its goals, such as budget constraints, limited manpower, or technology restrictions.