Chapter 9, Problem 3MCQ

To determine

The question requires us to determine the demand price.

Explanation of Solution

A quote puts an upper limit on the quantity sold or purchased in a market. Quota brings inefficiency in the market by generating a deadweight loss.

From the given diagram:

Without government interference, the market was at equilibrium at point E where the

Equilibrium price = $6

The equilibrium quantity = 1800 units

When government sets a quota of 1000, the consumers will have to pay a higher demand price as shown in the graph which is equal to $8.

Therefore, option “d” is correct.

Economics Concept Introduction

Consumers are willing to pay a price to buy a product that price is known as the demand price.