In a market with an effective production quota,
A)marginal social benefit exceeds marginal social cost.
B)marginal social benefit equals marginal social cost.
C)marginal social cost exceeds marginal social benefit.
D)marginal social cost is greater than the equilibrium price.
E)marginal social benefit is less than the equilibrium price.

Question

Quizplus · Accepted Answer

An effective production quota restricts supply, leading to a situation where the marginal social benefit of the good exceeds the marginal social cost, as the quantity produced is less than the socially optimal level.

In a Market with an Effective Production Quota