Subsidy Increases Farmer Income Without Raising Consumer Prices

Steps:

• Identify goal: Raise farmer incomes (revenue) while keeping food prices stable for consumers.
• Analyze market: Without intervention, price is set by supply-demand equilibrium.
• Evaluate policies: Check each option's impact on price and farmer revenue.
• Select best: Choose policy that boosts farmer revenue directly without shifting supply curve to raise prices.

Why C is correct:

• A production subsidy shifts the supply curve rightward, increasing output at the same market price, so farmers receive higher total revenue (price × quantity) plus subsidy payments, per basic supply-demand model.

Why the others are wrong:

• A: Maximum price below market creates shortage, lowering farmer revenue from reduced sales.
• B: Minimum price below market has no effect, as market price is already higher, leaving incomes unchanged.
• D: Releasing stocks increases supply, lowering prices and thus farmer revenues.

Final answer: C