When an effective production quota is applied in the market for wheat,the quantity produced ________ and the price ________.The marginal social benefit ________ the marginal social cost.
A)increases;rises;exceeds
B)decreases;falls;is less than
C)decreases;rises;exceeds
D)increases;falls;is less than
E)decreases;rises;is less than

Question

Quizplus · Accepted Answer

The application of an effective production quota in the market for wheat would decrease the quantity produced as producers would not be able to produce more than the quota limit. This would in turn cause the price to rise due to a decrease in supply. However, the marginal social benefit (the benefit to society as a whole) would exceed the marginal social cost (the cost to society as a whole), as the quota would reduce overproduction and negative externalities associated with it, such as environmental harm and wastage of resources.

When an Effective Production Quota Is Applied in the Market