Exhibit 39-9 -Refer to Exhibit 39-9.Under a target price system,with the target price set at P₁,the price at which consumers will buy the food item is A)P₁. B)P₂. C)P₃. D)P₄. E)There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

Under a target price system, consumers will only purchase the food item if the price is at or below the target price. The target price in this case is P₁. The price listed in the exhibit is P_{0S1U1B9 which is above the target price, therefore it is not the price at which consumers will buy the food item. Adding P}3 (the subsidy) to P_{0S1U1B9 brings the price to P_{3S1U1B9 which is also above the target price. However, adding P}3} twice to P_{0S1U1B9 brings the price to P₃ which is exactly the target price. Therefore, the answer is C.}

Exhibit 39-9 -Refer to Exhibit 39-9.Under a Target Price System,with the Target