Consider Canada's east coast lobster fishery.Suppose the government sets a production quota which is below the equilibrium quantity.Relative to the free-market equilibrium,we can expect the result to be

Question

Quizplus · Accepted Answer

When a production quota is set below the equilibrium quantity, it restricts supply, leading to an increase in price due to scarcity. This also results in a deadweight loss because the market is not operating at its most efficient point, where supply equals demand.

Consider Canada's East Coast Lobster Fishery