Question 1

Garbanzo Beans 
-If the federal government sets a minimum price for wheat at $5.00 per bushel when the equilibrium price is $4.50, then

Accepted Answer

If the government sets a minimum price above the equilibrium price, it creates a surplus because producers will be incentivized to produce more at the higher price. However, consumers will be less incentivized to buy at the higher price, causing excess supply. Since the government is setting a floor at $5.00 per bushel, this creates a permanent surplus because producers will continue to supply more wheat at the higher price, while consumers will not buy as much at the higher price. Therefore, the excess supply will continue to build up and create a surplus.

Question 2

Who ultimately benefits from price supports in agriculture?

Accepted Answer

Price supports in agriculture are a form of government intervention where the government sets a minimum price that farmers can receive for their crops. This price is typically higher than the market price, which helps farmers earn more income and make a profit. Therefore, ultimately, farmers are the ones who benefit from price supports. Consumers may see higher prices for food products due to the increased cost of production, while grocery store owners and exporters may not necessarily benefit since they may still have to pay higher prices for the crops they purchase.

Question 3

Garbanzo Beans 
-When the government establishes a minimum price for an agricultural product above the equilibrium price, the government is creating a(n)

Accepted Answer

When the government establishes a minimum price for an agricultural product above the equilibrium price, it creates a price floor. This is because the price cannot fall below the set minimum, creating a floor for the price. This often leads to a surplus of the product as suppliers are willing to sell more at the higher price, but consumers are not willing to buy as much at the higher price.

Question 4

Government intervention in agriculture usually involves

Accepted Answer

Government intervention in agriculture usually involves price supports in order to keep farm incomes high. This is done by setting a price floor for certain agricultural products, which guarantees farmers a minimum income for their crops. This helps to stabilize the agricultural sector and ensure that farmers have a steady source of income. Price ceilings are less common in agriculture as they would result in lower profits for farmers and could discourage production. Price supports are also not used to keep agricultural imports low as this would be considered protectionism, which is generally discouraged in international trade.

Question 5

One result of the agriculture price supports cited in the text is that

Accepted Answer

Agriculture price supports often result in surpluses of food, which can lead to the government giving away or selling the excess food at discounted prices. This is done to prevent the surplus from driving prices down even further, but it can also lead to food waste and inefficiency in the market.

Question 6

Garbanzo Beans 
-Consider the above table. If the government imposes a price ceiling on garbanzo beans of $8, what would be the likely result?

Accepted Answer

The answer of Garbanzo Beans 
-Consider the above table. If...

Question 7

When the government sets a price floor which is below the equilibrium price

Accepted Answer

When the government sets a price floor below the equilibrium price, it does not affect the market because the market price is already above the floor. Therefore, the equilibrium price is maintained.

Question 8

Of the following groups, which benefits most from a government price support program that establishes a floor price for an agricultural product that is higher than the product's market clearing price?

Accepted Answer

The group that benefits the most from a government price support program is the producers, as they earn a higher price on the sale of each unit and also sell more units, earning higher revenues. The program establishes a floor price that is higher than the market clearing price, which guarantees a minimum income for the producers. However, this program may lead to overproduction and surplus, which may lead to increased storage and other costs for the government. Consumers may not benefit as they may have to pay higher prices for the product, and taxpayers may still have to provide funds for surplus units of the product. The government may receive some subsidy payments from the producers, but it will unlikely exceed the costs associated with the program.

Question 9

Which of the following is most likely to benefit from government established price floors in agriculture?

Accepted Answer

Large farm owners and corporate farms are most likely to benefit from government-established price floors in agriculture because they have the scale and resources to produce large quantities that can still be sold at or above the floor price, ensuring their revenue is supported or increased by these policies.

Question 10

Garbanzo Beans 
-Which of the following will likely occur when price floors in agriculture are implemented?

Accepted Answer

Price floors set above the equilibrium price cause a surplus in the market because the quantity supplied exceeds the quantity demanded at that price. This is because producers are willing to supply more at the higher price, but consumers are not willing to buy as much.

Question 11

Garbanzo Beans 
-If the government created a surplus of an agricultural product due to price supports, how might they dispose of this surplus?

Accepted Answer

The government might choose any of these options to dispose of agricultural surpluses, depending on the specific circumstances and needs at the time. Giving it away to a foreign country can benefit both countries and improve relations, while purchasing and storing it away can prevent prices from dropping too low in the domestic market. In rare cases, having the farmer destroy the crop might be necessary to prevent further surpluses from accumulating, although this would be an extreme measure. Therefore, any of these options might be the best choice depending on the situation.

Question 12

Garbanzo Beans 
-Consider the above table. Assuming the government imposes a price ceiling on garbanzo beans of $4, what would be the likely result?

Accepted Answer

When a price ceiling is imposed below the equilibrium price, the quantity demanded exceeds the quantity supplied, leading to a shortage. In this case, at a price ceiling of $4, the quantity demanded is 8,000 garbanzo beans, while the quantity supplied is only 6,000 garbanzo beans, resulting in a shortage of 2,000 garbanzo beans. Therefore, option B is the correct answer.

Question 13

Garbanzo Beans 
-Consider the above table. Assuming the government imposes a price floor on garbanzo beans of $8, what would be the likely result?

Accepted Answer

The answer of Garbanzo Beans 
-Consider the above table. Assuming...

Question 14

-Refer to the above figure. A price support set at  will

Accepted Answer

The answer of 
-Refer to the above figure. A price...

Question 15

-Refer to the above figure for the corn market. The government wants to set an effective price support in the corn market. To be effective the price should be set

Accepted Answer

The answer of 
-Refer to the above figure for the...

Question 16

In the United States, government-imposed price supports are most often associated with

Accepted Answer

Government-imposed price supports are most often associated with agricultural products, such as crops like corn and wheat, or animal products like dairy and beef. These price supports are put in place to guarantee a minimum price for farmers, which helps to stabilize their incomes and prevent sharp fluctuations in prices.

Question 17

Agriculture price supports that establish a price floor at which agricultural products may be purchased that exceeds the market clearing price

Accepted Answer

Price floors set above the market clearing price cause a surplus because the quantity supplied exceeds the quantity demanded at that price. This does not create a shortage, benefit taxpayers, or necessarily benefit consumers, as they face higher prices.

Question 18

What is the result of an agricultural support price established above the equilibrium price?

Accepted Answer

When an agricultural support price is established above the equilibrium price, it will create excess quantity supplied of the product involved. This is because producers are more willing to supply more at the higher support price, but consumers are willing to buy less of the product at the higher price. Therefore, there will be more supply than demand, resulting in an excess quantity supplied.

Question 19

In which decade did the U.S. federal government first establish a system of agricultural price supports?

Accepted Answer

The U.S. federal government first established a system of agricultural price supports in the 1930s, during the Great Depression, with the Agricultural Adjustment Act of 1933. This act provided subsidies to farmers in exchange for reducing their crop acreage or livestock production, which was aimed at reducing surpluses and boosting prices.

Question 20

Federally provided agricultural subsidies in the United States have ________ with the passage of the 2002 Farm Security Act and the 2007 Food, Security, and Bioenergy Act.

Accepted Answer

The passage of the 2002 Farm Security Act and the 2007 Food, Security, and Bioenergy Act maintained federally provided agricultural subsidies in the United States.

Quiz 4: Extensions of Demand and Supply Analysis

Garbanzo Beans -If the federal government sets a minimum price for wheat at $5.00 per bushel when the equilibrium price is $4.50, then

Who ultimately benefits from price supports in agriculture?

Garbanzo Beans -When the government establishes a minimum price for an agricultural product above the equilibrium price, the government is creating a(n)

Government intervention in agriculture usually involves

One result of the agriculture price supports cited in the text is that

Garbanzo Beans -Consider the above table. If the government imposes a price ceiling on garbanzo beans of $8, what would be the likely result?

When the government sets a price floor which is below the equilibrium price

Of the following groups, which benefits most from a government price support program that establishes a floor price for an agricultural product that is higher than the product's market clearing price?

Which of the following is most likely to benefit from government established price floors in agriculture?

Garbanzo Beans -Which of the following will likely occur when price floors in agriculture are implemented?

Garbanzo Beans -If the government created a surplus of an agricultural product due to price supports, how might they dispose of this surplus?

Garbanzo Beans -Consider the above table. Assuming the government imposes a price ceiling on garbanzo beans of $4, what would be the likely result?

Garbanzo Beans -Consider the above table. Assuming the government imposes a price floor on garbanzo beans of $8, what would be the likely result?

-Refer to the above figure. A price support set at will