Which of the following agricultural programs will result in the smallest deadwei

Question

Which of the following agricultural programs will result in the smallest deadweight loss assuming farmers receive the same level of benefit in each case.

A. Instituting a price support program with the government purchasing any surplus of the good.

B. Instituting an acreage limitation program by paying farmers to take land out of production.

C. Paying money to farmers directly.

D. All of the above have the same effect on DWL because farmers receive the same benefit in each case.

If you could please explain why the right answer is correct instead of the others that would be very helpful. Thank you!

Explanation / Answer

Ans is D

Because all of the programs will have same deadweight loss because efficient outcome is same for all case and the final outcone for whoch the compensation needs to be paid is also same. Thus all programs have same deadweight loss.

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