Question

Consider this quote from Basic Economics. Just as a price set below the level that would prevail by supply and demand in a free market tends to cause more to be demanded and less to be supplied, creating a shortage at the imposed price, so a price set above the free market level tends to cause more to be supplied than demanded, creating a surplus. Simple as this principle seems, it is often lost sight of in the swirl of more complex events and more heady political rhetoric. Sowell, Thomas (2010-12-28). Basic Economics: A Common Sense Guide to the Economy, 4th Edition (p. 58). Basic Books. Kindle Edition.

SELECT TRUE OR FALSE FOR EACH STATEMENT, HINT: MORE THAN ONE ANSWER MAY OR MAY NOT BE CORRECT

a)Agricultural price supports instituted during the Great Depression, which created surpluses of agricultural products

b)The surplus of farm products created by the agricultural price supports instituted during the Great Depression created a never ending surplus of food.

c) Agricultural price supports caused vast amounts of food to be purchased by the U.S. government which the government subsequently destroyed.

d)Agricultural price supports, by increasing food production made the average american better off.

e)Agricultural price supports are an example of well educated, well informed government bureacrats making better decisions and achieving a better outcome than the free market.

f)India is another example where agricultural price supports increased the general level of prosperity

g)Europe is an example of agricultural price supports increasing the general level of prosperity.

h)Agricultural price supports in the United States benefit primarily small family farms.

Answer 1

a. This statement is True. The agriculture support system during 1930s. Government used to buy surplus from the farmers at these support prices.

b. False. The surplus was destroyed by the government from time to time.

c. This is true. The government destroyed the surplus to mainitain the prices at their pre-determined level.

d. False. This did not make americans better off, it was benificial only for farmers.

e. This is False. Support prices do not always lead to better outcome.

d. True. Agriculture support prices have proved to be benificial in India.