With an acreage limitation program (compared with the initial situation of no program), which of the following statements is true?
A)The impact on the government's budget is zero, consumer surplus increases and producer surplus decreases.
B)The impact on the government's budget is positive, consumer surplus decreases and producer surplus increases.
C)The impact on the government's budget is negative, consumer surplus increases and producer surplus decreases.
D)The impact on the government's budget is negative, consumer surplus decreases, producer surplus increases, and there is a deadweight loss.

Question

Quizplus · Accepted Answer

An acreage limitation program, which restricts the amount of land that can be used for farming, typically leads to a decrease in supply, resulting in higher prices. This can negatively impact the government's budget if it has to spend more on subsidies or purchase at higher prices, decrease consumer surplus because consumers have to pay more, increase producer surplus as producers receive higher prices, and create a deadweight loss due to the inefficient allocation of resources.

With an Acreage Limitation Program (Compared with the Initial Situation