Explain how agricultural price supports work and what the effects of the supports are
What will be an ideal response?
Under agricultural price supports, the government sets the price of an agricultural product above the equilibrium price. Consequently, there is an excess quantity of the product supplied. To keep the price at the floor level, the government must buy the surplus. Hence, consumers pay higher prices for the product, and taxpayers pay higher taxes to fund the government's purchases of the product.
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If you deposit $20,000 in cash into a demand deposit account at a bank that faces an 18 percent required reserve ratio the result will be:
a. the bank will add $3,600 to its excess reserves. b. the bank will add $16,400 to its excess reserves. c. the bank will add $16,400 to its total reserves. d. the bank will add $20,000 to its excess reserves.
If the social value of producing a good is always higher than the private value of producing it, then there is a
a. negative externality associated with the production of the good, and the market equilibrium quantity of the good is less than the socially optimal quantity. b. negative externality associated with the production of the good, and the socially optimal quantity of the good is less than the market equilibrium quantity. c. positive externality associated with the production of the good, and the market equilibrium quantity of the good is less than the socially optimal quantity. d. positive externality associated with the production of the good, and the socially optimal quantity of the good is less than the market equilibrium quantity.