Under a production quota policy, the government can maintain a particular support price by reducing the quantity supplied. To maintain a particular support price, how must the quota amount change if the demand curve becomes more elastic?

A) Quota amount increases
B) Quota amount decreases
C) Quota amount does not change
D) Quota amount depends on the supply curve

Production Quota

A limit set on the amount of goods that can be produced, often used by governments to control supply and stabilize market prices.

Support Price

A price level set by governments in order to stabilize or increase prices of specific goods by buying up the supply or providing subsidies.

Demand Curve

A graphical representation showing the relationship between the price of a good and the amount of that good consumers are willing to buy.