Suppose that the government wants to support local organic farmers with a price support system. If so, we would expect a market price support policy that establishes a binding price floor to:
A)decrease the price paid by consumers.
B)push the price paid by consumers to the equilibrium level.
C)increase the price received by farmers.
D)decrease the price received by farmers.

Question

Quizplus · Accepted Answer

A price support system with a binding price floor will increase the price received by farmers, as it guarantees them a higher minimum price for their products. This will incentivize farmers to produce more, and potentially increase the supply of organic produce in the market. However, this policy may also lead to an oversupply of organic products, which could lead to a surplus and potentially waste. It is unlikely to decrease the price paid by consumers, as the price floor will prevent prices from falling to the equilibrium level.

Suppose That the Government Wants to Support Local Organic Farmers