Deck 3: Competitive Markets and Government Policy: Agriculture

Question 1

An increase in demand is represented as a rightward shift in the demand curve.

Answer 1

True

Question 2

If the market is in equilibrium, then quantity demanded and quantity supplied will be equal.

Answer 2

True

Question 3

An increase in the price of Big Macs will cause the demand for Whoppers, a substitute, to fall.

Answer 3

False

Question 4

As the price of farm products has fallen, the demand for farm labor has increased.

Question 5

Bananas are a normal good. An increase in income will cause the equilibrium price and quantity of bananas to fall.

Question 6

The quantity of farm products demanded is very responsive to price changes.

Question 7

An equilibrium exists when there is no reason for a situation to change.

Question 8

Increases in the supply of agriculture products have led to a downward trend in the prices of agriculture products.

Question 9

Suppose the equilibrium price of oranges is $1.25 per pound. If the current price is $1.50, an excess demand will exist.

Question 10

Suppose demand and supply both increase. We do not know how equilibrium quantity will respond.

Question 11

The law of supply states that producers will supply less of a product at a lower price.

Question 12

A decrease in supply is represented as a rightward shift of the supply curve.

Question 13

If demand for a product decreases, there will be excess supply at the original equilibrium price.

Question 14

Suppose the price of wheat used in producing bread decreases. The equilibrium price of bread will decrease and the equilibrium quantity of bread will increase.

Question 15

An increase in the price of milk will cause an increase in the amount of milk demand.

Question 16

Cars and tires are examples of substitute goods.

Question 17

If an increase in income causes the demand for steak to fall, then steak is an inferior good.

Question 18

An advance in technology in the production of cheese will cause an increase in the supply of cheese.

Question 19

The increase in the supply of farm products due to increased technology is overshadowed by demand increases for farm products from increased population.

Question 20

A change in income will cause a change in the supply of cattle.

Question 21

A competitive market is one where there are no barriers to entry, and there are many buyers and many sellers.

Question 22

Suppose cheese is a normal good. An increase in income will cause:

A) a rightward shift of the demand curve for cheese.
B) a leftward shift of the demand curve for cheese.
C) a movement upward along the demand curve for cheese.
D) a movement downward along the demand curve for cheese.

Question 23

Members of Congress trading votes to pass legislation of interest to each other is called Logrolling.

Question 24

A decrease in demand is represented graphically as:

A) a leftward shift in the demand curve.
B) a rightward shift in the demand curve.
C) a movement upward along the demand curve.
D) a movement downward along the demand curve.

Question 25

The law of demand states that holding everything else constant:

A) consumers will be willing to buy more of a product at a lower price.
B) consumers will be willing to buy more of a product when their income increases.
C) consumers will be willing to buy more of a product at a higher price.
D) consumers will be willing to buy more of a product when they need it.

Question 26

Equilibrium exists when:

A) consumers can't purchase all of a product they desire.
B) firms can't sell all of the output they have produced.
C) there is no tendency for price to change.
D) there is a tendency for price to rise.

Question 27

A decrease in quantity demanded may be represented graphically as:

A) a leftward shift in the demand curve.
B) a rightward shift in the demand curve.
C) a movement upward along the demand curve.
D) a movement downward along the demand curve.

Question 28

A competitive market is one where there are no barriers to entry, and there are many buyers and one seller.

Question 29

Output constraints have been very successful in reducing the supply of farm products.

Question 30

The decline of the family farm has been the result of technical and economic forces that would be difficult to reverse.

Question 31

An increase in demand is represented graphically as:

A) a leftward shift in the demand curve.
B) a rightward shift in the demand curve.
C) a movement upward along the demand curve.
D) a movement downward along the demand curve.

Question 32

Suppose there is a decrease in Sean's income. If steak is a normal good:

A) there will be an increase in Sean's demand for steak.
B) there will be an increase in the quantity of steak demanded by Sean.
C) Sean's demand curve for steak will shift to the left.
D) there will be an increase in the supply of milk.

Question 33

The law of supply states that holding everything else constant:

A) producers will be willing to sell more of a product at a lower price.
B) producers will be willing to sell more of a product at a higher price.
C) producers will be willing to sell more of a product when costs are low.
D) producers will be willing to sell more of a product that consumers want.

Question 34

Suppose spaghetti is an inferior good. An increase in income will cause:

A) a rightward shift of the demand curve for spaghetti.
B) a leftward shift of the demand curve for spaghetti.
C) a movement upward along the demand curve for spaghetti.
D) a movement downward along the demand curve for spaghetti.

Question 35

The existence of economic profits has been one reason for government regulation of agriculture.

Question 36

A price support sets a maximum price that can be charged for a product.

Question 37

An increase in quantity demanded may be represented graphically as:

A) a leftward shift in the demand curve.
B) a rightward shift in the demand curve.
C) a movement upward along the demand curve.
D) a movement downward along the demand curve.

Question 38

Price supports result in excess supply.

Question 39

Suppose cookies and milk are complements. A decrease in the price of milk will lead to:

A) a decrease in the quantity of cookies demanded.
B) an increase in the demand for cookies.
C) an decrease in the demand for cookies.
D) a decrease in the demand for milk.

Question 40

A decrease in the price of tennis racquets will lead to:

A) a decrease in demand for tennis balls.
B) an increase in demand for tennis balls.
C) no change in supply for tennis balls.
D) a increase in the demand for tennis racquets.

Question 41

If quantity supplied exceeds quantity demanded, we know that:

A) price will tend to fall.
B) excess supply exists.
C) sellers plan to sell more than buyers plan to buy.
D) All of the above.

Question 42

Which of the following is likely to result in a change in the supply of corn?

A) an increase in the price of land used to produce corn.
B) an increase in the price of wheat.
C) an increase in the price paid to the individuals who are hired to harvest the corn.
D) All of the above.

Question 43

An increase in quantity supplied is represented graphically as:

A) a rightward shift of the supply curve.
B) an upward movement along the supply curve.
C) a downward movement along the supply curve.
D) a leftward shift of the supply curve.

Question 44

An increase in the price of butter will lead to:

A) a decrease in demand for margarine.
B) an increase in demand for margarine.
C) no change in supply for margarine.
D) a increase in the demand for butter.

Question 45

Suppose the market price is currently above the equilibrium price. We would expect to find:

A) excess demand in the market.
B) price increasing to equilibrium.
C) quantity demanded greater than quantity supplied.
D) excess supply in the market.

Question 46

Which of the following could cause an increase in demand?

A) a decrease in the price of the good.
B) a decrease in the price of a complement.
C) a decrease in the price of a substitute.
D) an advance in technology.

Question 47

An increase in quantity of wheat supplied would be caused by:

A) an increase in the price of wheat.
B) a decrease in the price of wheat.
C) a decrease in the cost of farm labor.
D) an increase in technology.

Question 48

If quantity demanded exceeds quantity supplied, we know that:

A) the market is in equilibrium.
B) market price is less than the equilibrium price.
C) market price exceeds the equilibrium price.
D) market price equals the equilibrium price.

Question 49

An increase in the supply of eggs would most likely be caused by:

A) a decrease in the price of eggs.
B) an increase in the price of eggs.
C) an increase in the price of chicken feed.
D) a decrease in the price of chicken feed.

Question 50

A decrease in quantity supplied is represented graphically as:

A) a rightward shift of the supply curve.
B) an upward movement along the supply curve.
C) a downward movement along the supply curve.
D) a leftward shift of the supply curve.

Question 51

Suppose there is an increase in demand. This would result in:

A) an increase in both the equilibrium price and quantity exchanged.
B) an increase in the equilibrium price and a decrease in the equilibrium quantity exchanged.
C) a decrease in the equilibrium price and an increase in the equilibrium quantity exchanged.
D) a decrease in both the equilibrium price and quantity exchanged.

Question 52

All of the following would cause the supply of orange juice to change except:

A) an increase in the price of orange juice.
B) a decrease in the price of fertilizer used in orange groves.
C) a freeze in Florida that damaged the orange crop.
D) an increase in wages paid to orange pickers.

Question 53

A decrease in supply will result in:

A) an increase in both equilibrium price and quantity.
B) a decrease in both equilibrium price and quantity.
C) a decrease in equilibrium price and an increase in equilibrium quantity.
D) an increase in equilibrium price and a decrease in equilibrium quantity.

Question 54

All of the following will cause a shift in the demand curve for beef except:

A) a change in income.
B) a change in the price of a complement.
C) a change in the price of a substitute.
D) a change in the price of beef.

Question 55

An increase in the price of tennis racquets will lead to:

A) a decrease in demand for tennis balls.
B) an increase in demand for tennis balls.
C) no change in supply for tennis balls.
D) a increase in the demand for tennis racquets.

Question 56

An increase in supply means that:

A) producers are willing to supply more at a higher price.
B) producers are willing to supply more at each price.
C) producers are willing to supply less at a lower price.
D) producers are willing to supply less at each price.

Question 57

An increase in supply will result in:

A) an increase in both equilibrium price and quantity.
B) a decrease in both equilibrium price and quantity.
C) a decrease in equilibrium price and an increase in equilibrium quantity.
D) an increase in equilibrium price and a decrease in equilibrium quantity.

Question 58

Suppose good 1 and good 2 are complements. If the price of good one decreases, this will cause:

A) a decrease in demand for good 1.
B) an increase in demand for good 2.
C) an increase in the demand for good 1.
D) a decrease in demand for good 2.

Question 59

If quantity supplied exceeds quantity demanded, we know that:

A) the market is in equilibrium.
B) market price is less than the equilibrium price.
C) market price exceeds the equilibrium price.
D) market price equals the equilibrium price.

Question 60

The law of supply states that holding everything else constant:

A) producers will be willing to supply more of a good at a higher price.
B) producers will be more efficient when government regulates less.
C) producers are very responsive to profits.
D) producers will be willing to supply more of a good at a lower price.

Question 61

A deficiency payment is:

A) the difference between a price support and the market price multiplied by the quantity of output sold.
B) the difference between a target price and the market price multiplied by the quantity of output sold.
C) the difference between a price ceiling and the market price multiplied by the quantity of output sold.
D) the difference between a maximum legal price and the market price multiplied by the quantity of output sold.

Question 62

The decline in farm population has been caused by:

A) the rapid decrease in output per farmer due to technological advances.
B) decreasing opportunity costs in the nonagricultural economy.
C) government regulations prohibiting entry into agriculture.
D) technological advances increasing the supply of farm output.

Question 63

A target price program will:

A) lower prices of the product for consumers.
B) increase tax collections because of government deficiency payments.
C) increase revenues for farmers.
D) All of the above.

Question 64

A decrease in demand for cheese will create:

A) an excess supply at the original equilibrium price.
B) an excess demand at the original equilibrium price.
C) an upward pressure on the price of cheese.
D) an equilibrium pressure on the price of cheese.

Question 65

Farm prices tend to be unstable because:

A) the demand for some farm products is relatively sensitive to changes in price.
B) the demand for some farm products is relatively insensitive to changes in price.
C) the supply of some farm products is relatively sensitive to changes in price.
D) the equilibrium remains relatively constant.

Question 66

A price floor is:

A) a maximum legal price set by government.
B) likely to result in excess demand.
C) a minimum legal price set by government.
D) a price less than the equilibrium price.

Question 67

Jack lobbies his Congress person in an attempt to keep a price support program for bee-keepers in tact. This is an example of:

A) economic rent seeking.
B) self-interested rent seeking.
C) political rent seeking.
D) legislative rent seeking.

Question 68

Farmers can decrease risk by:

A) refusing to purchase crop insurance.
B) using more crop diversification than they have in the past.
C) growing crops that consumers need.
D) making consumers less sensitive to price changes in the agricultural sector.

Question 69

Farm programs remain in place despite the fact they impose large costs upon society because:

A) the programs provide relatively large benefits to a small group that rewards the politician with a great deal of support.
B) the benefits of the program are spread over a large number of people resulting in benefits to the most deserving farmers.
C) the cost to each individual in society is so large that individuals will not discipline the politician for the policy.
D) more people gain than lose, although total losses are greater than total benefits.

Question 70

Suppose the price of cheese decreases. The effect on consumers would be represented graphically as:

A) a leftward shift in the demand curve.
B) a rightward shift in the demand curve.
C) a movement upward along the demand curve.
D) a movement downward along the demand curve.

Question 71

An increase in the price of wheat will lead to:

A) a decrease in supply.
B) an increase in demand.
C) an increase in quantity demanded.
D) a decrease in quantity demanded.

Question 72

Which of the following is an example of farm policy that has been followed by the U.S. government?

A) price supports.
B) target prices.
C) output restrictions.
D) All of the above.

Question 73

Suppose the price of cheese increases. This will result in:

A) a decrease in demand.
B) a decrease in quantity demanded.
C) an increase in supply.
D) a decrease in quantity supplied.

Question 74

Government programs affecting agriculture often receive support because:

A) farmers face individual risk.
B) farmers face market risk.
C) farmers face intense competition.
D) all of the above.

Question 75

The economic profits earned by farmers who first introduce a crop to the market may decline as a result of:

A) competition.
B) falling marginal cost of production.
C) unstable farm incomes.
D) government price floors on agricultural products.

Question 76

The major difference between a price support program and a target price program is that:

A) price supports do not produce an excess supply.
B) target prices produce an excess demand.
C) target prices subsidize foreign buyers while price supports subsidize domestic buyers.
D) target prices subsidize domestic and foreign buyers.

Question 77

Output constraints have not been a very successful means of controlling government payments to farmers because:

A) farmers take their most productive land out of production.
B) farmers take their least productive land out of production.
C) farmers farm their land less intensively.
D) All of the above.

Question 78

Farmers can decrease risk by:

A) purchasing crop insurance.
B) specializing in production of one crop.
C) growing crops that consumers need.
D) making consumers less sensitive to price changes in the agricultural sector.

Question 79

Output constraints are designed to:

A) increase the supply of agricultural products so as to lower their price.
B) decrease the supply of agricultural products so as to lower the subsidy government must pay to farmers.
C) let land lie fallow for a number of years so that it will be more productive when it is put back into use.
D) decrease the demand for agricultural products.

Question 80

Population growth has caused:

A) an increase in demand for farm products.
B) a decrease in demand for farm products.
C) an increase in supply of farm products.
D) a decrease in supply of farm products.