How did economists generally respond to the parity concept for price supports in agricultural markets?

• A. They criticized it for distorting market prices and leading to inefficiency.
• B. They argued it would naturally lead to increased competition among farmers.
• C. They supported it as the best way to ensure fair prices for consumers.
• D. They believed it would reduce government intervention in the market.

Answer: (A)

Verified step by step guidance

1. Understand the parity concept: It is a price support mechanism aimed at keeping agricultural prices at a level that gives farmers the same purchasing power they had in a base period, often by government intervention.
2. Recognize the economic perspective on price supports: Economists analyze how such supports affect market equilibrium, supply, demand, and efficiency.
3. Evaluate the criticism: Economists generally argue that price supports distort the natural market price by artificially inflating prices above equilibrium, which can lead to surpluses and inefficiencies.
4. Consider the impact on competition: Instead of increasing competition, price supports can reduce it by protecting less efficient producers and discouraging market adjustments.
5. Conclude that economists typically do not support parity price supports as they believe these interventions cause market distortions and inefficiencies rather than promoting fair prices or reducing government involvement.