Explain the economic effects of farm price supports on society in terms of the allocation of resources to agriculture and three other social costs
What will be an ideal response?
Farm price supports result in an over allocation of resources to agriculture because they result in more output than would be produced in a purely competitive market. The marginal costs of production exceed the marginal benefit to society. This additional output represents an efficiency loss.
The other social costs include: (1) taxpayers paying higher taxes to finance the government’s purchase of the surplus; (2) additional costs to administer the price support program; and (3) “rent-seeking” activity by farm groups to obtain and maintain political support for price supports and other programs that benefit farm incomes.
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Compared to the perfectly competitive firm, the monopolist's input demand curve is
A) more elastic. B) more inelastic. C) due to a constant per-unit price of the product. D) marginal factor cost.
Which of the following industries would be considered to have a labor intensive production process?
A. Printing a novel B. Farming in a poor country C. Building a road. D. Driving a truck.
The debit side of the current account includes the imports of
a. goods only b. goods and services c. services only d. services and resources only e. financial assets
When the interest rate decreases, the opportunity cost of holding money
a. increases, so the quantity of money demanded increases. b. increases, so the quantity of money demanded decreases. c. decreases, so the quantity of money demanded increases. d. decreases, so the quantity of money demanded decreases.