Why did the government impose restrictions on how much could be grown on land owned by a farmer?

• A. To encourage farmers to use more advanced technology
• B. To reduce the need for government subsidies in the agricultural sector
• C. To stabilize agricultural prices and prevent overproduction
• D. To increase the amount of land available for urban development

Answer: (C)

Verified step by step guidance

1. Understand the context: Governments often intervene in agricultural markets to address issues like price volatility and overproduction, which can harm both farmers and consumers.
2. Recognize the problem of overproduction: When farmers produce too much of a crop, the market price tends to fall sharply due to excess supply, which can reduce farmers' incomes and destabilize the agricultural sector.
3. Identify the role of restrictions: By limiting how much can be grown on a given piece of land, the government aims to control the total supply of agricultural products, preventing prices from falling too low.
4. Connect to price stabilization: These restrictions help maintain a balance between supply and demand, which stabilizes prices and ensures farmers can earn a sustainable income without relying heavily on subsidies.
5. Consider alternative reasons: While encouraging technology use or freeing land for urban development are possible goals, the primary economic rationale for such restrictions is to stabilize prices and prevent overproduction.