-The figure above shows the market for cotton in Georgestan. The government regulates the market with a production quota set at 8 million pounds per year. With the quota in place, the amount of cotton produced in Georgestan is ________ because the marginal social cost of a pound of cotton is ________ the marginal social benefit of a pound of cotton.

Question

Quizplus · Accepted Answer

The marginal social cost of a pound of cotton is greater than the marginal social benefit of a pound of cotton because the production quota restricts the quantity supplied below the equilibrium level. This results in a deadweight loss and an inefficient allocation of resources.

-The Figure Above Shows the Market for Cotton in Georgestan