If farmers operating in the competitive wheat industry are incurring losses,and are not kept in business with government subsidies,which of the following will result?

Question

Quizplus · Accepted Answer

If farmers are incurring losses without government subsidies, it is a sign that their production is inefficient and not competitive in the market. In the long run, resources will be reallocated out of the wheat industry and towards more productive uses. This will help to improve the overall efficiency of the economy and result in higher economic growth. Prices and quantities produced in the industry may change in the short term, but in the long term, the market will adjust to the new equilibrium. The other answer choices are not likely to occur as they do not represent the natural response of the market to a loss-making industry.

If Farmers Operating in the Competitive Wheat Industry Are Incurring