During the Great Depression, the federal government swung into action to help farmers. In 1933, it established a system of price support for many agricultural products. Today, there are price supports for wheat, feed grains, cotton, rice, peanuts, soybeans, sorghum and other agricultural products. The nature of the support was and remains quite simple. The government simply chooses a support price for an agricultural product, and acts to ensure that the price of the product never falls below the support level.
If production exceeds the amount consumers want to buy at the support price, what happens to surplus? Quite simply, the government must buy the surplus at the support price.
What do you think could possibly happen if congress eliminated all farm subsidies?
If all firm subsidies were eliminated, then the market price will prevail. The market price will more than likely be ...
The solution clearly and concisely provides an answer to the problem. A brief answer is given which helps for students who are just looking to confirm their understanding of the problem.