Asked by Haseeb Akhtar on Apr 29, 2024
Verified
Farm programs such as those of the United States and the European Union cause a misallocation of international agricultural resources primarily because:
A) they distort domestic and world agricultural prices.
B) they inhibit technological progress in agriculture.
C) production and trade occur on the basis of comparative advantage.
D) price supports are set below market-clearing levels.
Misallocation
The inefficient distribution or use of resources in an economy, often leading to suboptimal outcomes in terms of welfare or economic efficiency.
International Agricultural Resources
The global availability and distribution of resources used in agricultural production, such as land, water, and inputs.
Agricultural Prices
Agricultural prices relate to the current market value of agricultural products, influenced by factors like supply, demand, production costs, and global trade dynamics.
- Gain insight into how price supports and subsidies influence resource allocation on both a national and international level.
- Gain insight into the effects of farm programs and international trade agreements on agricultural markets.
Verified Answer
MN
Mahnoor NadeemMay 03, 2024
Final Answer :
A
Explanation :
Farm programs such as those of the United States and the European Union cause a misallocation of international agricultural resources primarily because they distort domestic and world agricultural prices. Price distortion can lead to overproduction and surplus, and inefficient allocation of resources as some countries may continue to produce certain crops even if it is not their comparative advantage.
Learning Objectives
- Gain insight into how price supports and subsidies influence resource allocation on both a national and international level.
- Gain insight into the effects of farm programs and international trade agreements on agricultural markets.