Which of the following statements is true?
A)In a price support program,consumers end up paying the price support.
B)In a target price system,consumers end up paying the target price.
C)In a target price system,the per-unit deficiency payment is equal to the difference between the quantity demanded at the market price and the quantity supplied at the market price.
D)Acreage allotment programs directly (as opposed to indirectly)raise agricultural product prices.
E)b and d

Question

Quizplus · Accepted Answer

In a price support program, the government subsidizes the price of a product to keep it above the equilibrium price, which results in a surplus of the product. This surplus is purchased by the government, which then sells it or stores it, but the cost of the subsidy is eventually passed on to consumers in the form of higher prices.

B is incorrect because in a target price system, the government sets a price floor for a product, but if the market price is below the target price, farmers receive a deficiency payment from the government to make up the difference. Consumers do not directly pay the target price.

C is incorrect because the per-unit deficiency payment in a target price system is equal to the difference between the target price and the market price, not the difference between the quantity demanded and supplied.

D is incorrect because acreage allotment programs limit the amount of land that a farmer can use to grow a particular crop, which reduces the supply of that crop and can result in higher prices, but the price increase is indirect and not a direct result of the program.

Therefore, the correct answer is A.

Which of the Following Statements Is True