(Figure: The Market for Clams)Use Figure: The Market for Clams.The government imposes a quota limiting sales of clams to 1,000 pounds.According to the figure,the quota rent per pound in this case is:
A)$7.50.
B)$5.00.
C)$2.50.
D)The quota rent cannot be determined from the information provided.

Question

(Figure: The Market for Clams)Use Figure: The Market for Clams.The government imposes a quota limiting sales of clams to 1,000 pounds.According to the figure,the quota rent per pound in this case is: 
A)$7.50. 
B)$5.00. 
C)$2.50. 
D)The quota rent cannot be determined from the information provided.

Quizplus · Accepted Answer

The quota rent is the difference between the market price with the quota in place and the price that would exist in a free market. In this case, the market price with the quota in place is $7.50 per pound (where supply equals demand at the quota limit of 1,000 pounds), while the price that would exist in a free market is $5.00 per pound (where supply equals demand at the quantity where the supply and demand curves intersect). Therefore, the quota rent per pound is $7.50 - $5.00 = $2.50.

(Figure: the Market for Clams)Use Figure: the Market for Clams