Which of the following would result from a price support program when the support price is set above the equilibrium price,ceteris paribus?
A)Output would decline.
B)The price paid by consumers would rise.
C)The consumption of the product would rise.
D)Quality would deteriorate.

Question

Quizplus · Accepted Answer

When the support price is set above the equilibrium price, it creates a price floor for the product, which means that the price cannot fall below a certain level. This will encourage producers to increase their output and supply more of the product. However, since the price paid by consumers is higher than the equilibrium price, it would result in a decrease in the quantity demanded. As a result, the market would be left with surplus production, which would lead to a buildup in inventory. This would force the government to purchase the excess output, which would be costly for the taxpayers. Therefore, the main effect of a price support program is to raise the price paid by consumers.

Which of the Following Would Result from a Price Support