Of the Following Groups, Which Benefits Most from a Government

question 305

Multiple Choice

Of the following groups, which benefits most from a government price support program that establishes a floor price for an agricultural product that is higher than the product's market clearing price?

• A) Consumers, who purchase more units of the product than they did before the price support program was implemented
• B) Taxpayers, who no longer must provide funds to purchase surplus units of the product once the price support program is in place
• C) Producers, who earn a higher price on the sale of each unit and also sell more units, thereby unambiguously earning higher revenues
• D) The government, which receives subsidy payments from producers that are required to sell more of the product at a higher price under the government's program

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Definitions:

Paid-in Capital

Funds raised by a company through the sale of common or preferred stock.

Preferred Stock

A type of stock that provides a fixed dividend before any dividends are paid to common stockholders and typically has no voting rights.

Common Stock

Represents ownership shares in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities; represents the ownership interest of the shareholders.