Explain why a voluntary production quota is difficult to operate
What will be an ideal response?
A voluntary quota is difficult to operate because a production quota results in a massive incentive to "cheat" on the production quota by increasing production. A production quota decreases the quantity produced. By decreasing the quantity produced, a production quota raises the price and reduces the marginal social cost of the last unit produced. Because the price exceeds the marginal social cost, producers have an incentive to increase their production (beyond the quota amount) to boost their profit.
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Many argue that the "soft power" of the U.S. has been reduced, referring to its
a. negotiating ability. b. military presence. c. export level. d. moral leadership.
When the quantity of money supplied equals the quantity of money demanded, then
A) the goods market is in equilibrium. B) the asset market is in equilibrium. C) the money market is in equilibrium. D) the money market is not in equilibrium.