Which of the Following Statements Is Correct

question 7

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:

Electronic Goods

Products that use electric power for their operation, including consumer electronics like phones, TVs, and computers.

Law Of One Price

The economic theory stating that in an efficient market, identical goods must have only one price.

Trade Barriers

Restrictions set by a government to control international trade, often to protect domestic industries.

Purchasing Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" approach to assess the relative value of the currencies.