Setting a production quota does not always achieve the efficient use of a common resource because
A)marginal cost differs for each producer and it is in everyone's self-interest to cheat and produce more than the assigned quota.
B)the marginal private benefit from a production quota is zero.
C)marginal cost differs for each producer and the marginal social benefit from a production quota is zero.
D)a production quota does not totally eliminate the problem of free-ridership of a common resource.
E)the Coase theorem is invalid in this market.

Question

Quizplus · Accepted Answer

Setting a production quota often leads to the problem of cheating, because each producer has a different marginal cost of production. It becomes the self-interest of these producers to take advantage by producing more than the assigned quota. Thus, the efficient use of a common resource cannot be achieved through a production quota.

Setting a Production Quota Does Not Always Achieve the Efficient