Quick Answer
The correct answer is that both policies apply. This is because Azure Policy inheritance in management group hierarchies works by default: any policy assigned at a higher-level management group, such as Root, flows down to all child management groups, including Europe, and their subscriptions, like Production. When a second policy is assigned at the Europe level, it does not replace or override the Root-level policy; instead, both are evaluated and enforced, with the most restrictive effect taking precedence. On the AZ-900 exam, this concept tests your understanding of how policy inheritance cascades through management groups, and a common trap is assuming that a lower-level assignment cancels a higher-level one. Remember the memory tip: “Inheritance adds, it never subtracts”—policies stack downward, so the Production subscription is subject to both the tag-denial policy from Root and the additional policy from Europe.
This AZ-900 practice question tests your understanding of describe azure management and governance. Match the stated requirement to the specific cloud service, access model, or configuration option — many options are valid in isolation but not for this scenario. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
A company has a management group hierarchy: Root > Europe > Production. They assign a policy at the Root level that denies creation of resources without a tag. Later, they assign a different policy at the Europe level. What is the effective effect on the Production subscription?
Only the policy at the Europe level applies
Why wrong: Policies are inherited, so both policies apply.
Only the policy at the Root level applies
Why wrong: Policies are not replaced; they accumulate.
Both policies apply
Policies assigned at different levels in the management group hierarchy all apply to child subscriptions.
The policy at the lower level overrides the Root policy
Why wrong: There is no override; all policies are evaluated.
Answer choices
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
Both policies apply
Azure Policy is inherited by default from higher-level management groups down to subscriptions. When a policy is assigned at the Root management group, it applies to all child management groups and subscriptions, including the Production subscription. Assigning an additional policy at the Europe management group does not remove or override the Root-level policy; instead, both policies are evaluated and enforced, with the most restrictive effect taking precedence. Therefore, the Production subscription is subject to both policies.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
For each option: why learners choose it and why it is or isn't the right answer here.
Only the policy at the Europe level applies
Why it's wrong here
Policies are inherited, so both policies apply.
Only the policy at the Root level applies
Why it's wrong here
Policies are not replaced; they accumulate.
Both policies apply
Why this is correct
Policies assigned at different levels in the management group hierarchy all apply to child subscriptions.
Related concept
Read the scenario before looking for a memorised answer.
The policy at the lower level overrides the Root policy
Why it's wrong here
There is no override; all policies are evaluated.
Common exam traps
The trap here is that candidates often confuse Azure Policy inheritance with role-based access control (RBAC) inheritance, where a lower-level assignment can override a higher-level one, but Azure Policy is cumulative and does not support override behavior.
Detailed technical explanation
Under the hood, Azure Policy uses a hierarchical inheritance model where policies assigned at a parent management group are automatically applied to all child management groups and subscriptions. When multiple policies assign the same effect (e.g., both 'Deny'), the system evaluates all policies and denies the resource creation if any policy denies it. In real-world scenarios, this additive behavior is critical for enforcing baseline compliance (e.g., mandatory tagging) at the root while allowing subsidiary teams to add local policies without weakening global controls.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
A cloud solutions architect for a retail company is evaluating services for a new workload. The correct answer here reflects best practice for the specific scenario described — not a general cloud recommendation. Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option. Cloud exam questions reward reading the constraint carefully: the same technology can be right or wrong depending on the use case.
What to study next
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FAQ
Describe Azure management and governance — This question tests Describe Azure management and governance — Read the scenario before looking for a memorised answer..
The correct answer is: Both policies apply — Azure Policy is inherited by default from higher-level management groups down to subscriptions. When a policy is assigned at the Root management group, it applies to all child management groups and subscriptions, including the Production subscription. Assigning an additional policy at the Europe management group does not remove or override the Root-level policy; instead, both policies are evaluated and enforced, with the most restrictive effect taking precedence. Therefore, the Production subscription is subject to both policies.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
Read the scenario before looking for a memorised answer.
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Same concept, more angles
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Variation 1. A company has a management group hierarchy: Root (tenant root group) > Contoso > Sales, Marketing. They want to assign an Azure policy that applies to all subscriptions under the Sales and Marketing management groups only. The policy must not affect any other subscriptions in the hierarchy. Where should they assign the policy?
hardWhy A: Azure Policy assignments are inherited by all child resources within the scope where the policy is assigned. To restrict the policy to only the Sales and Marketing management groups without affecting other subscriptions under Contoso, you must assign the policy separately to each of those two management groups. Assigning at a higher scope (e.g., Contoso or Root) would cause the policy to apply to all subscriptions under that scope, including any other child management groups or subscriptions.
Last reviewed: Jun 11, 2026
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