When an effective production quota is applied, the quantity produced decreases and the price of the last unit increases. This occurs because a quota limits the supply of a good or service in the market. When supply is restricted, the price typically rises due to the increased scarcity of the product.
As a result, the marginal benefit of producing the last unit will exceed the marginal cost. This relationship is significant because it highlights the inefficiency created by production quotas. When the marginal benefit of producing an item is greater than its marginal cost, it signals that there is still demand for that product, and reducing production could lead to a loss in economic welfare.