Which of the Following Statements Is Correct

question 87

Multiple Choice

Which of the following statements is correct?

• A)Price supports may induce either an underallocation or an overallocation of resources to farm products.
• B)Supported prices have no effect on the allocation of resources to farm products.
• C)Supported prices induce an underallocation of resources to farm products.
• D)Price supports induce an overallocation of resources to farm products.

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Definitions:

Surplus Test

A financial measure used to determine if an entity has excess assets over liabilities, often in insurance contexts.

Net Asset Test

A financial metric used to evaluate a company's financial health by subtracting total liabilities from total assets.

Liability

The state of being responsible for something, especially in terms of legal or financial obligations.

Creditors

Individuals or institutions to whom money is owed.