Which of the following statements is correct?

Question

Quizplus · Accepted Answer

If the demand for agricultural products is inelastic, a relatively small decrease in supply will result in a relatively large increase in price, which will increase gross farm incomes. This is the basic economic rationale behind the price support program. Therefore, statement C is correct.

Statements A, B, and D are incorrect. The price support program was intended to stabilize farm incomes by increasing the price of agricultural products. It did not hasten the exodus of resources from agriculture. The main beneficiaries of government price support assistance were large commercial farmers, not very low-income farmers as stated in statement B. Finally, there may be a misallocation of resources in rural America due to various factors, but absolute and relative increases in the size of the farm population are not among them.

Which of the Following Statements Is Correct