History and Overview of Production Controls and Marketing Quotas. Josh Morgan. Three Main Types of Government Policy Tools. 1. Price supports 2. Restrictions on output or input use 3 Compensatory payments. Price Supports.
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History and Overview of Production Controls and Marketing Quotas
Price supports inevitably lead to increased production, which leads to surpluses and Treasury costs, thereby creating an incentive for further government involvement through programs to control production.
Government acquisition of surpluses is costly to the taxpayers.
One way to minimize this is to restrict the quantity of the product produced or marketed.
All effective price support programs and programs that artificially reduce market prices below world levels are inconsistent with the competitive market process. Such programs impede mutually voluntary exchange and distort markets through accompanying import quotas, export subsidies, and other restrictions on compensation.