Question

1. Would the U.S. economy be better off without government intervention in agriculture? Who would benefit? Who would lose?

2. Why do farmers prefer price supports to direct payments?

3. Who is hurt and who is helped by an increase in the legal minimum wage? Under what circumstances might a higher minimum not reduce employment?

Answer 1

1) No, because without proper government intervention, there would be no price support programs by the government.

The consumers would benefit and the farmers would lose. The consumers would benefit since they will have to pay a lower price as compared when government intervention were involved. The farmers would be on the losing side as their excess stocks won’t be purchased in times of excess supply.

2) Direct payment is a one-time payment, so it is beneficial for short run only. On the other hand, price support guarantees farmers a particular price for a lonf term. therefore they prefer price support over direct payment.

3) The workers receiving the wage will is helped and the employer paying is hurt.

When the nature of the employment is highly indispensable, the increase in the minimum wage will not reduce the employment level.