Ch 5 Part 2 Flashcards
1
Q
Quota
A
A form of quantity control, which is an upper limit on the quantity of some good that can be bought or sold and enforced by the government to prevent market quantity from being too much in a free market
2
Q
How does government limit market quantity exchanged?
A
By issuing a target # of licenses to sellers
3
Q
Quota license
A
Owner’s right to produce a certain amount of a good legally
4
Q
Wedge
A
Difference between the demand and supply prices; earnings that accrue to the license holder from ownership of the right to sell good
5
Q
Costs of quantity control
A
Inefficiency and missed opportunity,
Incentives for illegal activities,
Once created the quota prices are challenging to eliminate
