Exhibit 39-4
-Refer to Exhibit 39-4.The price support of $6 per bushel would cost the government

Question

Exhibit 39-4 
-Refer to Exhibit 39-4.The price support of $6 per bushel would cost the government

Quizplus · Accepted Answer

The equation for the government cost of price support is:
Government cost = (price support - market price) x quantity
In this case, the market price is $3.50 and the quantity is 600 bushels. So:
Government cost = ($6 - $3.50) x 600 = $2.50 x 600 = $1,500
But since this is for two crop years, we need to double the government cost:
Government cost = $1,500 x 2 = $3,000. Therefore, the correct answer is (B) $3,000.

Exhibit 39-4 -Refer to Exhibit 39-4.The Price Support of $6 Per Bushel