Farm Programs Such as Those of the United States and the European

question 180

Multiple Choice

Farm programs such as those of the United States and the European Union cause a misallocation of international agricultural resources primarily because

• A)they distort domestic and world agricultural prices.
• B)they inhibit technological progress in agriculture.
• C)production and trade occur on the basis of comparative advantage.
• D)price supports are set below market-clearing levels.

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Definitions:

Socially Optimal

A state of the market where resources are allocated in the most efficient manner, maximizing the overall benefit to society.

Negative Externality

An economic situation where a third party is negatively affected by the outcome of a transaction or activity, for instance, pollution affecting the health of nearby residents who are not involved in the polluting activity.

Drunk Driving

The act of operating a motor vehicle while the driver's ability to do so is impaired by the effects of consuming alcohol.

Used Oil

Recycled or waste oil that has been used and then collected for reprocessing or disposal, often considered hazardous waste.