Which of the following statements is correct?
A. Price supports may induce either an underallocation or an overallocation of resources to
farm products.
B. Supported prices have no effect on the allocation of resources to farm products.
C. Supported prices induce an underallocation of resources to farm products.
D. Price supports induce an overallocation of resources to farm products.
Answer: D
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Price controls:
a. are always popular with consumers because they lower prices. b. create shortages. c. increase producer surplus because firms can now sell a greater quantity of a good at a lower price. d. are necessary to preserve equity.
Economic reasoning suggests that individuals should spend little time learning about election candidates and other electoral issues because:
a. marginal benefit is zero. b. the information cost is too high compared to the benefit to the individual. c. information is easily available. d. the result of the election are unlikely to have a serious impact on a market-driven economy.