Which of the following would result from a price support program when the support price is set above the equilibrium price,ceteris paribus?
A)Output would decline.
B)The price paid by consumers would rise.
C)The consumption of the product would rise.

Question

Quizplus · Accepted Answer

When the support price is set above the equilibrium price, it means that the government is willing to purchase any excess supply at that higher price. This creates an artificial floor on the price, which is higher than what the market would determine on its own. As a result, consumers would have to pay more for the product, while producers would increase their output to take advantage of the guaranteed higher price. However, since the support price is above the equilibrium, there would be less demand for the product, leading to a decline in consumption.

Which of the Following Would Result from a Price Support