Question

In order to protect dairy farmers from bankruptcy, the government creates a price floor making it illegal to sell milk below a profitable price. What will be the economic effects of this price floor? A) The dairy farmers will survive and there will be no adverse effects. B) The dairy farmers will go out of business despite the government's attempt to save them. C) The dairy farmers will survive, but milk will cost more. D) The dairy farmers will go out of business as the entire economy collapses into a recession.

Answer 1

Based on the scenario, the economic effects would be : C. Dairy farmers will survive , but milk will cost more

By setting the floor price, the government increase the annual revenue of the farmers , making them able to survive. But of course the consumer have to pay more for the product

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