Suppose the wheat industry is in long-run equilibrium,so that farmers are earning a normal rate of return.Suppose the farmers are able to convince the Congress to provide a minimum price for wheat that is above the equilibrium price.The result would be:

Question

Quizplus · Accepted Answer

If the minimum price for wheat is set above the equilibrium price, farmers may produce more than what consumers demand, resulting in a surplus of wheat. This surplus will incur storage and disposal costs, leading to deadweight losses in the long run. As a result, consumers will bear the higher costs, and farmers will not earn any extra profits in the long run. Hence, this policy will result in a decrease in economic efficiency in the long run.

Suppose the Wheat Industry Is in Long-Run Equilibrium,so That Farmers