Question

Price supports (such as those placed on agricultural goods) Select one: a. are designed to benefit suppliers. b. hurt demanders because they face artificially higher prices. c. create surpluses that have to be purchased by government agencies. d. impose a higher tax burden on society in order to finance government purchases. e. generate all of the above consequences.

Answer 1

Answer:

The correct answer is letter "E": generate all of the above consequences.

Explanation:

Price supports, mostly known as price floors, are set by the government to protect producers of certain goods and services. By doing so, the product prices will have a minimum that cannot be trespassed. This is to make sure producers can continue with their operations at least earning a minimum profit margin.

The counterpart, the demanders, are affected because their purchasing power is decreased by setting the price at a certain level without the option of going down from there. Besides, the higher the price, the more taxes consumers will be paying. The disadvantage of price floors is surplusses in production that are the result of demanders not being able to pay the price set by the government. Eventually, government agencies purchase the surplus quantity in an attempt to keep the equilibrium in the market.