What happens in marketplace when the federal government

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Explain what happens in the marketplace when the federal government, in response to lobbying by (small) farmers, places a floor price under a bushel of corn that is greater than the market equilibrium price; for example, raising the market price of corn from $2.00 per bushel to $2.50 per bushel in order to help farmers.

Will this create a surplus or a shortage of corn, ceteris paribus? Will this lead to additional taxpayer expenses, such as storage silo costs? Could this lead further to even more expenses to remove and replace the corn with the most current yields, and send the prior corn to countries in support of foreign aid? Which do you think is best for society, given your review: to impose the floor prices on corn, or to let the market determine the prices? Include in your answer the potential impacts on farmers.

Reference no: EM13885521

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