Which of the following statements is correct?
A)Price supports results in a shortage of the good
B)A subsidy results in an over allocation of resources to farm products
C)Price supports results in an over allocation of resources to farm products
D)Income supports has a direct impact on agricultural production

Question

Quizplus · Accepted Answer

Price supports incentivize farmers to produce more than what the market demands, leading to an over allocation of resources to farm products. This can result in surpluses, which can ultimately lead to government intervention to purchase and store excess goods or export them at a loss. Subsidies, on the other hand, provide financial assistance to farmers to make production cheaper, but do not necessarily incentivize overproduction. Income supports provide assistance to farmers regardless of their level of production, and do not directly impact agricultural production.

Which of the Following Statements Is Correct