If an Agricultural Price Support Keeps a Price Above the Equilibrium

question 83

Multiple Choice

If an agricultural price support keeps a price above the equilibrium market price,

• A)Shortages of agricultural products will result.
• B)More resources will be devoted to agriculture than are optimal.
• C)There will be redistribution of income from the government to consumers.
• D)There will be positive market feedback leading to even higher prices.

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Definitions:

Market Price

The current price at which an asset or service can be bought or sold, determined by supply and demand.

Emissions Standard

Legal limit on the amount of pollutants that a firm can emit.

Marginal External Cost

The additional cost incurred by society due to one more unit of a good or service being produced, that is not accounted for by the producer.

External Cost

A cost of a transaction that affects someone who is not directly involved in the transaction.