1- When an effective production quota is applied, the
quantity produced ______ and the price ______. On the last unit,
the marginal benefit ______ marginal cost.
A.increases; rises; exceeds
B.decreases; rises; exceeds
C.increases; falls; is less than
D.decreases; falls; is less than
Correct option (B).
A production quota is imposed on production such that producers
are not allowed to produce a quantity above a specified
quantitative quota. To be binding, the quota is set lower than
current quantity being produced. So, after the quota, quantity
produced decreases, therefore quantity supplied falls, leading to
higher price. At this level, marginal benefit is higher than