Of the following groups, which benefits most from a government price support program that establishes a floor price for an agricultural product that is higher than the product's market clearing price?
A) consumers, who purchase more units of the product than they did before the price support program was implemented
B) taxpayers, who no longer must provide funds to purchase surplus units of the product once the price support program is in place
C) producers, who earn a higher price on the sale of each unit and also sell more units, thereby unambiguously earning higher revenues
D) the government, which receives subsidy payments from producers that are required to sell more of the product at a higher price under the government's program

Question

Quizplus · Accepted Answer

The group that benefits the most from a government price support program is the producers. By establishing a floor price for their product, they can earn higher revenue on each unit sold, and also sell more units. This is because the higher price makes it more profitable for producers to produce and sell the product. Consumers may see higher prices and possibly reduced quantity due to the decrease in supply. Taxpayers may see a decrease in funds needed to buy surplus units of the product, but they still have to pay for the price support program. The government may receive subsidy payments from producers, but this does not necessarily mean they benefit the most.

Of the Following Groups, Which Benefits Most from a Government