When the federal government installs a price support program that requires the government to purchase all of a good not bought in the private economy at the support price, changes in producer surplus:
A) are negative.
B) are positive, but more than offset by the cost to consumers and the government.
C) are positive, and not offset by the cost to consumers and the government.
D) and consumer surplus are both positive.

Question

Quizplus · Accepted Answer

Price support programs typically increase producer surplus because producers receive a guaranteed price for their goods, often above the market equilibrium price. However, this comes at a cost to consumers, who pay higher prices, and the government, which incurs expenses purchasing and storing the surplus goods. The overall effect is that the gains to producers are more than offset by the losses to consumers and the cost to the government.

When the Federal Government Installs a Price Support Program That