Under a production quota policy, the government can maintain a particular support price by reducing the quantity supplied. To maintain a particular support price, how must the quota amount change if the demand curve becomes more elastic?
A) Quota amount increases
B) Quota amount decreases
C) Quota amount does not change
D) Quota amount depends on the supply curve

Question

Quizplus · Accepted Answer

If the demand curve becomes more elastic, it means that consumers are more sensitive to changes in price. Therefore, to maintain a particular support price, the government must reduce the quantity supplied more than before, which means they must decrease the quota amount.

Under a Production Quota Policy, the Government Can Maintain a Particular