In a market with a price support set above the equilibrium price,
A) consumers gain.
B) taxes on consumers decrease.
C) marginal benefit exceeds marginal cost.
D) the market is efficient.
E) farmers gain.

Question

Quizplus · Accepted Answer

In a market with a price support set above the equilibrium price, farmers gain. This is because the price support guarantees them a higher price for their goods than the market would otherwise provide. Consumers, on the other hand, may be harmed as they are forced to pay a higher price for the goods, and there may be excess supply in the market. The market is not efficient as resources are not allocated in the most optimal way. Taxes on consumers are not necessarily affected by the price support, and it is not necessarily true that marginal benefit exceeds marginal cost.

In a Market with a Price Support Set Above the Equilibrium