Which one of the following is an example of a price floor?
- A.Minimum Support Price (MSP) for Jowar in India
- B.Subsidy given to farmers to buy fertilizers
- C.Price paid by people to buy goods from ration shops
- D.Maximum Retail Price (MRP) printed on the covers/packets of goods sold in India
Correct answer
Explanation
The correct answer is A, Minimum Support Price (MSP) for Jowar in India. A price floor is a lowest price fixed by the government, and the MSP guarantees farmers that price for crops such as jowar.
A price floor is set above the market price to protect sellers; prices may not fall below it. In India the Union government announces Minimum Support Prices for kharif and rabi crops on the recommendation of the Commission for Agricultural Costs and Prices, and government agencies stand ready to buy at that price. If the market price falls below the MSP, the farmer can still sell at the floor.
B is wrong because a fertiliser subsidy lowers the farmer's cost; it does not fix a minimum price for any product. C is wrong because the low issue price at ration shops under the public distribution system is a price ceiling that protects consumers. D is wrong because the Maximum Retail Price is an upper limit on what a seller may charge, which also makes it a ceiling.
Exam tip: floor protects producers (MSP, minimum wage), ceiling protects consumers (PDS issue price, MRP, rent control).
Practice Questions
View allThe Fourteenth Finance Commission assigned different weights to the following parameters for distribution of tax proceeds to the States :
1. Income distance
2. Population
3. Demographic changes
4. Area
Arrange the aforesaid parameters in descending order in terms of their weights.
- A.1-2-3-4
- B.1-2-4-3
- C.1-3-2-4
- D.4-3-2-1
Show answer
Income distance had the highest weight, followed by population, area and demographic change. The Fourteenth Finance Commission, chaired by Y.V.
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- A.The market price must be greater or equal to average variable cost in the short run.
- B.The market price must be equal to marginal cost.
- C.The market price must be equal to average cost in the long run.
- D.The marginal cost decreases at the equilibrium output.
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- B.Third Five-Year Plan
- C.First Five-Year Plan
- D.Second Five-Year Plan
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- A.Foreign Direct Investment
- B.Commercial Borrowing
- C.Invisibles
- D.External Assistance
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Read the full explanation →Which one among the following was the focus of the Twelfth Five-Year Plan?
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- B.Social Justice and Equality
- C.Food, Work and Productivity
- D.Attainment of Self-reliance
Show answer
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