Acreage limitations are used by the government because:
A)they induce less deadweight loss than cash transfers to farmers.
B)they raise the market price of an agricultural product without the surpluses associated with price supports.
C)the government wishes to lower agricultural prices.
D)they are an effective way to feed poor people.

Question

Quizplus · Accepted Answer

Acreage limitations help to increase the market price of agricultural products without creating surpluses, which can lead to deadweight loss. The government uses this method to support farmers while also keeping prices stable for consumers. The other options listed are not relevant to the use of acreage limitations. Acreage limitations, also known as supply management, can raise the market price of an agricultural product by limiting the amount of land that can be used for production. This results in less surplus production that would have occurred with price supports, but without inducing as much deadweight loss as cash transfers to farmers. The government may use this policy to support farmers and stabilize agricultural markets without causing excess supply and lower prices. However, it is not primarily aimed at feeding poor people or lowering agricultural prices.

Acreage Limitations Are Used by the Government Because