Question

Price floors and price supports set a minimum price below which a good or service cannot...

Price floors and price supports set a minimum price below which a good or service cannot be sold. Minimum wage laws and agricultural price supports are common examples of such price controls.
When price floors are used to keep prices above free-market levels in the agricultural industry, which of the following outcomes are common? Check all that apply.
A. Overinvestment in the agricultural industry
B. A decrease in the future supply of agricultural goods
C. A surplus of agricultural goods
D. A problem of disposal of surplus agricultural goods

Homework Answers

Answer #1

The price floor is a minimum price limit generally set up by the government. The market price cannot go beyond this limit. Price floor is applied to prevent price of goods and services from falling below a certain limit. The most common examples for price floors is minimum wage laws and agricultural support prices. In case price floor is set above the equilibrium price level it has a number of adverse effects. Artificially high price encourages over-investment in the industry. At high prices more is supplied by the producers but the consumers prefer to purchase lesser at higher prices. This would consequently lead to a surplus as the quantity supplied is greater than the quantity demanded. Then this excess quantity supplied needs to be disposed off. So, a disposal problem arises.

Thus, we can say that the correct answer are options A, C and D.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Some farmer groups want the government to legislate minimum price laws for their product – much...
Some farmer groups want the government to legislate minimum price laws for their product – much like the minimum wage laws. If the government were to accept their proposal and guarantee parity prices for all agricultural produce (except those covered by supply-managed marketing boards), discuss: Which national and agricultural goals would be served? Who would gain and who would lose? What would happen to the price of resources in agriculture? What would be the long-term consequences of this policy on...
Consider this quote from Basic Economics. Just as a price set below the level that would...
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...
practice quiz 1. A legal maximum price at which a good can be sold is a...
practice quiz 1. A legal maximum price at which a good can be sold is a price a. floor b. stabilization c. support d. ceiling 2. A price floor is not binding if a. the price floor is higher than the equilibrium market price b. the price floor is lower than the equilibrium market price c. people are willing to buy less when the price floor is imposed as they did before d. the government sets it 3. Rationing by...
3. Effects of rent control Rent controls force landlords to price apartments below the equilibrium price...
3. Effects of rent control Rent controls force landlords to price apartments below the equilibrium price level. An immediate effect is a shortage (excess demand) of apartments, because the quantity of apartments demanded is greater than the quantity supplied at the regulated price. When cities prevent landlords from charging market rents, which of the following are common long-run outcomes? Check all that apply. Nonprice methods of rationing emerge. The future supply of rental housing units increases. The quantity of available...
Read and consider the Minimum Wage case study presented below. Evaluate the arguments presented for and...
Read and consider the Minimum Wage case study presented below. Evaluate the arguments presented for and against the minimum wage. States have the right to mandate a minimum wage that is higher than the federal minimum wage. Consider the state of Georgia, research its current demographics, cost of living, minimum wage laws, unemployment history, etc. and write an argument for your state representatives supporting or contesting an increase in the minimum wage. Please make this no less then 2-3 paragraphs...
For which pairs of goods is the cross-price elasticity most likely to be negative? a. Ipads...
For which pairs of goods is the cross-price elasticity most likely to be negative? a. Ipads and laptops b. pens and pencils c. hamburgers and french fries d. coffee and baseballs Suppose gasoline prices rise and remain high in the future. As a result, drivers typically will a. reduce their quantity demanded of gasoline more in the long run than in the short run. b. not reduce their quantity demanded in the short run nor the long run. c. increase...
ECO 101-S70: Final Quiz 2 CHAPTER 3: Demand, Supply and Equilibrium 1. Which of the following...
ECO 101-S70: Final Quiz 2 CHAPTER 3: Demand, Supply and Equilibrium 1. Which of the following could cause a decrease in consumer demand for product X? a.   a decrease in consumer income b.   an increase in the prices of goods which are good substitutes for product X c. an increase in the price which consumers expect will prevail for product X in the future d. a decrease in the supply of product X 2. If two goods are substitutes for...
1. Which is statement is true? I. A single-price monopolist charges a price equal to the...
1. Which is statement is true? I. A single-price monopolist charges a price equal to the marginal cost of the last unit sold. II. A monopolist with positive marginal costs and facing a linear demand curve always sets a quantity (or price) such that it sells on the elastic section of the demand curve. III. A monopolist regulated by marginal-cost pricing regulation sells at a price that covers its variable and fixed costs of production, but it still causes a...
QUESTION 80 Which of the following would not violate usury laws? Charging a lower price for...
QUESTION 80 Which of the following would not violate usury laws? Charging a lower price for a cash sale than a credit sale Charging a commission when lending money as an agent for the lender Charging a commission when lending your own money a and b 0.25 points    QUESTION 81 Which of the following statements is true about "time is of the essence" clauses in contracts? These clauses are unenforceable because they violate public policy. These clauses are examples...
21. The “prisoner’s dilemma” facing a cartel is that A) what is good for the cartel...
21. The “prisoner’s dilemma” facing a cartel is that A) what is good for the cartel is bad for society as a whole B) the production level that is best for a self-interested firm may not be what is best for the cartel as a whole C) what is good for the cartel as a whole is to maximize production; the dilemma is that individual cartel members may not want to share technology secrets with other firms D) the profit-maximizing...