When a production quota is used to remedy the tragedy of the commons,then
A) the quota is set so that use of the resource is where marginal private benefit equals marginal private cost.
B) the quota is set so that use of the resource is where marginal private benefit equals marginal social benefit.
C) the market equilibrium, but not the efficient outcome, is achieved.
D) users of the resource have an incentive to cheat on the quota.
E) previous users of the resource are given the incentive to avoid use of the resource.

Question

Quizplus · Accepted Answer

The tragedy of the commons refers to a situation where individual users, acting independently according to their own self-interest, behave contrary to the common good of all users by depleting or spoiling a shared resource. When a production quota is used to manage this issue, it creates an incentive for users to cheat on the quota to gain more than their allocated share, as adhering strictly to the quota may put them at a disadvantage compared to those who do not.

When a Production Quota Is Used to Remedy the Tragedy