Graphically show how a price floor works and tell how Congress acts to restrict supply to prop up farm prices.
What will be an ideal response?
Refer to the Fair Prices and Market Surplus graph in this chapter. This graph shows that a price floor set above equilibrium provides farmers with a higher price for their products, but creates a surplus. Congress acts to eliminate this surplus by shifting the supply curve leftward with (1) acreage set-aside programs that pay farmers for voluntary reductions in crop acreage, (2) the Dairy Termination Program that pays dairy farmers to slaughter or export their dairy cattle, (3) marketing orders where industry groups are permitted to limit the quantity of output brought to market, and (4) import quotas and import taxes.
You might also like to view...
The slope
A) of a straight line is the same regardless of where on the line it is calculated. B) equals the change in the value of the variable measured on the vertical axis divided by the change in the variable measured along the horizontal axis. C) will be small if a large change in the variable measured on the vertical axis is associated with a small change in the variable measured along the horizontal axis. D) Answers A and B are correct. E) Answers A and C are correct.
A (non-price discriminating) monopolist with zero marginal cost but recurring fixed costs may end up not producing even if it would be efficient for him to produce.
Answer the following statement true (T) or false (F)
If a government decides to move from a regressive tax system to a progressive tax system, there will be a(n) ________ in equity and a(n) ________ in efficiency
A) increase; increase B) decrease; decrease C) increase; decrease D) decrease; increase
Which of the following will cause a rightward shift of the demand curve?
A. an increase in the expected future price of the good B. a decrease in the price of the good C. a decrease in the cost of production D. all of these