When the government institutes a target price,
A)a surplus is created.
B)consumers must pay the target price.
C)the farmer receives a deficiency payment if the market price is below the target price.
D)the farmer receives a deficiency payment if the market price is above the target price.
E)all of the above

Question

Quizplus · Accepted Answer

When the government institutes a target price, the farmer receives a deficiency payment if the market price is below the target price. This is done to provide a safety net for farmers and to ensure that they receive a minimum price for their crops. A surplus may be created if the target price is set too high, but it is not a necessary outcome of implementing a target price. Consumers do not directly pay the target price, and farmers do not receive a deficiency payment if the market price is above the target price.

When the Government Institutes a Target Price