Who gains from a price support? Who loses? Explain how the size of the gain compares to the size of the loss
What will be an ideal response?
Producers gain from a price support because the price of the good or service increases. As a result, the producer surplus increases. Consumers lose from a price support because the price the good or service increases. As a result, the consumer surplus decreases. Because a price support program creates a deadweight loss, it is the case that the decrease in consumer surplus exceeds the increase in producer surplus.
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If someone you know offers far more to hire you to work for than you could ever have imagine, the opportunity cost of working for yourself would rise
a. True b. False Indicate whether the statement is true or false
Suppose that, for every 1-percentage-point decline in the discount rate, commercial banks collectively borrow an additional $2 billion from Federal Reserve Banks. Also assume that the reserve ratio is 10 percent. If the Fed lowers the discount rate from
4.0 percent to 3.5 percent, bank reserves will: A. increase by $1 billion and the money supply will increase by $5 billion. B. decline by $1 billion and the money supply will decline by $10 billion. C. increase by $1 billion and the money supply will increase by $10 billion. D. increase by $10 billion and the money supply will increase by $100 billion.