If government decides to control the amount of a good allowed to be transacted in 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 a government imposes a quota or limits the amount of a good that can be transacted, it often leads to unintended consequences such as the creation of black markets. This is because when legal market supply is restricted, prices can rise above what some consumers are willing to pay, or above what some suppliers are allowed to charge, leading to incentives for transactions outside of the regulated market.

If Government Decides to Control the Amount of a Good