Question

Complete the sentence. A production quota is​ ______ because at the quantity produced​ ______. A. ​inefficient; marginal social benefit is less than marginal social cost B. ​efficient; marginal social benefit equals marginal social cost C. ​inefficient; marginal social benefit exceeds marginal social cost D. ​efficient; the price received by the farmers maximizes their profit

Answer 1

Answer: The correct answer is option "D". Efficient; price received by farmers maximizes their profit.

Explanation: Production quota of a good in economics is a regulations or restrictions mostly made by government or the market leaders to regulate the price of a particular good, to ensure that the producer is not in shortage nor making too much of surplus profit.

The price of a particular agricultural good can be set high to encourage farmers to produce at a given quantity in order to maximize their profit or when the government notices that the price the producer or farmer sells a particular good is too much for the people to bear they can also decide to regulate the price by lowering the price to a particular price level, in both cases the producer is never at loss.

Answer 2

Answer:

The correct answer is C. ​inefficient; marginal social benefit exceeds marginal social cost.

Explanation:

The objective of these quotas determined by the state entity is to increase the price that producers receive by reducing the supply of goods, this also reduces the marginal cost of producing quotas. The production quota is ineffective because it leads to insufficient production, in the quantity established by the quota, the marginal profit is equal to the market price, and the marginal cost is less than the market price, therefore, the marginal profit exceeds marginal costs.