Quantity controls set below the equilibrium quantity do NOT cause:
A)incentives for illegal activities.
B)missed opportunities in the form of mutually beneficial transactions that don't occur.
C)the supply price of the quantity transacted to exceed the demand price of the quantity transacted.
D)quota rents.

Question

Quizplus · Accepted Answer

When quantity controls are set below equilibrium quantity, it creates a shortage of the product, where demand exceeds supply. This shortage can lead to incentives for illegal activities (such as black market sales), missed opportunities for mutually beneficial transactions, and the emergence of quota rents (extra profit earned by those who hold the licenses or permits to produce or sell the controlled good). However, the supply price (cost of producing the last unit) of the quantity that is actually transacted will not exceed the demand price (willingness to pay by consumers) for that same quantity, because the controls set the quantity transacted at a lower level than the equilibrium quantity, where supply and demand are equal.

Quantity Controls Set Below the Equilibrium Quantity Do NOT Cause