CIMA Exam CIMAPRA17-BA1-1 Topic 1 Question 88 Discussion

Actual exam question for CIMA's CIMAPRA17-BA1-1 exam

Question #: 88
Topic #: 1

Which ONE of the following statements best describes the impact of a government minimum price established above free market price?

AIt will create a shortage of the product and incentives for producers and consumers to evade the policy

BIt will create a surplus of unsold produce and reduce farm incomes

CIt will not affect market price or producer incomes at the present time

DIt will increase farm incomes but may eventually force the government to introduce maximum quotas on production

Show Suggested Answer

Suggested Answer: B

by Devora at May 21, 2024, 01:09 AM

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Alona

1 months ago

I'm going to go with option E: the government installs a giant price-enforcing robot to make sure everyone obeys the minimum price. What could possibly go wrong?

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Slyvia

2 days ago

User 1: I think option A is the best description of the impact of a government minimum price.

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Dick

1 months ago

I'm going with option C. If the minimum price is set just right, it might not affect the market price or producer incomes at all. Though I'm not sure how realistic that is in practice.

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Sue

1 months ago

Option D seems plausible. The higher farm incomes might be good in the short term, but eventually the government may have to step in with production quotas to manage the surplus.

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Van

1 months ago

Hmm, I was leaning towards option A. A government-imposed minimum price would disrupt the normal market forces and create incentives for people to try and get around the policy.

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Desmond

3 days ago

But wouldn't a surplus of unsold produce and reduced farm incomes also be a possible outcome if the minimum price is set too high?

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Tuyet

21 days ago

I think you're right, option A seems to be the most accurate. It would definitely lead to a shortage and encourage people to find ways to bypass the minimum price.

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Talia

2 months ago

I think option B is the correct answer. A minimum price above the free market price will lead to a surplus of unsold produce and reduce farm incomes.

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Irma

14 days ago

Yeah, I think you're right. It would definitely have a negative impact on farm incomes if there is a surplus of unsold produce.

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Eliz

17 days ago

I agree, option B seems to be the most accurate. It makes sense that a minimum price above the free market price would result in a surplus of unsold produce.

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