If government decides to control the amount of a good allowed into a market, this will:
A) always result in an increase in efficiency in the market.
B) increase incentives for market participants to engage in black market activities.
C) result in the equilibrium quantity being produced if the quota is binding.
D) lead to more of the good being produced.

Question

Quizplus · Accepted Answer

When the government imposes a quota, it restricts the supply of a good, which can create shortages and incentivize black market activities as participants seek to bypass the restrictions.

If Government Decides to Control the Amount of a Good