A production quota is set below the equilibrium quantity.At the quota quantity,marginal social benefit is ________ marginal social cost and the level of production is ________.
A)less than;efficient
B)greater than;efficient
C)less than;inefficient
D)greater than;inefficient
E)equal to;efficient

Question

Quizplus · Accepted Answer

When a production quota is set below the equilibrium quantity, the marginal social benefit of the last unit produced is greater than the marginal social cost, indicating that more of the good could be produced to increase overall welfare, thus making the level of production inefficient.

A Production Quota Is Set Below the Equilibrium Quantity