7.3 Production Quotas
MyEconLab Concept Video
So far in this chapter, we have examined the effects of government actions that seek to prevent the price from moving toward the equilibrium price. In this final section, we look at a market intervention that aims to block the quantity supplied from moving toward the equilibrium quantity. The tool used for this purpose is a production quota, which is a government regulation in a market that places an upper limit on the quantity that may be supplied.
A government can’t regulate the quantity supplied without isolating the domestic market from global competition. For this reason, ...
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