Asked by Angel Martinez on Jul 09, 2024
Verified
As illustrated in the textbook, the government can further increase the support price of a commodity by purchasing excess supplies and using a:
A) production quota.
B) consumption tax.
C) excess profits tax.
D) minimum wage.
Production Quota
A limit set on the amount of a specific product that can be produced, often implemented by governments or organizations to control supply and stabilize prices.
Support Price
A price set by the government or a regulatory body at a certain level to maintain the income of producers and encourage production.
Excess Supplies
A situation where the quantity of a product offered is greater than the quantity demanded at the current price.
- Comprehend the idea and impacts of price floors and price supports in agricultural markets.
Verified Answer
JP
Justin PadillaJul 12, 2024
Final Answer :
A
Explanation :
The government can increase the support price of a commodity by implementing a production quota, which limits the quantity of the commodity that can be produced. However, this would likely result in shortages and higher prices for consumers. Instead, if the government purchases excess supplies at the higher support price, it will create additional market demand and support the higher price for producers. This approach also ensures availability of the commodity in the market without causing shortages or inflation.
Learning Objectives
- Comprehend the idea and impacts of price floors and price supports in agricultural markets.