Whereas an export tax allows each firm to decide on its production volume in response to a market price,what does a quota do
A)It dictates the minimum quantity each can produce.
B)It dictates the maximum quantity each can produce.
C)It dictates the maximum price each can charge.
D)It dictates the minimum price each can charge.

Question

Quizplus · Accepted Answer

A quota dictates the maximum quantity each firm can produce or import, regardless of market demand or price. It is a physical restriction on the quantity of goods that can be traded, whereas an export tax is a financial disincentive to export. Choice A is incorrect because a quota does not dictate a minimum quantity of production. Choice C is incorrect because a quota does not influence the price that can be charged for a product. Choice D is incorrect because a quota does not affect the minimum price that can be charged.

Whereas an Export Tax Allows Each Firm to Decide on Its