A production quota limits the amount of a good that can be produced, which typically raises the price due to reduced supply. It can also decrease the marginal social cost of production by reducing overproduction and associated inefficiencies.

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A Production Quota

Question 109

Multiple Choice

A production quota

A) increases the marginal social cost of production.
B) lowers the price and increases the marginal social cost of production.
C) increases demand for the good.
D) raises the price and decreases the marginal social cost of production.
E) makes production more efficient.

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