Which of the following is a feature that quotas and embargoes have in common as public solutions to externalities?

• A. Both set a minimum price for a good.
• B. Both encourage unlimited trade of the good.
• C. Both provide subsidies to producers.
• D. Both restrict the quantity of a good that can be traded.

Answer: (D)

Verified step by step guidance

1. Understand the context: Quotas and embargoes are government-imposed restrictions used to address externalities or regulate trade.
2. Recall the definition of a quota: It is a limit on the quantity of a good that can be imported or produced.
3. Recall the definition of an embargo: It is a complete ban or restriction on trade of a particular good or with a particular country.
4. Compare the effects of quotas and embargoes: Both limit the quantity of the good that can be traded, either partially (quota) or completely (embargo).
5. Conclude that the common feature is that both restrict the quantity of a good that can be traded, unlike price controls or subsidies.