Question 1

The ambitious plan to wean American agriculture from subsidies, as embodied in the Freedom to Farm Act of 1996,

Accepted Answer

The Freedom to Farm Act aimed to reduce subsidies but faced challenges when farm prices fell in 1998 and 1999, leading to a return to subsidies.

Question 2

A major criticism of agricultural subsidies is that

Accepted Answer

Agricultural subsidies often lead to a misallocation of resources by encouraging overproduction and inefficient farming practices, rather than addressing the balance of resources between agriculture and other sectors of the economy.

Question 3

Since 2002, agricultural policy in the United States has

Accepted Answer

Since 2002, agricultural policy in the United States has generally retreated from the free-market intent of the Freedom to Farm Act of 1996, often through increased subsidies and protections for farmers, rather than further opening up to free market principles or drastically reducing subsidies.

Question 4

The major factor contributing to lower prices for many farm products in 1998 and 1999 was

Accepted Answer

The major factor contributing to lower prices for many farm products during 1998 and 1999 was reduced export demand combined with strong crop production. This led to an oversupply in the market, which, according to the principles of supply and demand, results in lower prices.

Question 5

The fundamental cause of agricultural price and income instability in the United States has been a(n)

Accepted Answer

The fundamental cause of agricultural price and income instability in the United States has been the overallocation of resources to the farm sector of the economy relative to that of the nonfarm sector. This overallocation leads to overproduction, which in turn causes prices and incomes to fluctuate more significantly.

Question 6

A major feature of the "Freedom to Farm" Act of 1996 was the

Accepted Answer

The "Freedom to Farm" Act of 1996 significantly changed U.S. agricultural policy by eliminating many price supports and acreage allotments, aiming to allow market forces to determine the production of agricultural crops more freely.

Question 7

Which group of farmers benefits the least from price supports in agriculture?

Accepted Answer

Price supports in agriculture typically benefit farmers who produce large quantities of supported crops, which often excludes those receiving the lowest average farm-family income, as they may not have the resources or land to produce at such scales.

Question 8

Farm programs such as those maintained by the European Union (EU)and the United States

Accepted Answer

Farm programs in the European Union and the United States often involve subsidies and protections for domestic farmers. These measures can lead to overproduction and dumping on the world market, which distorts global trade by making it difficult for farmers in developing countries to compete.

Question 9

To get the U.S. Senate to pass a farm bill, a U.S. senator from a farm state asks for the support of a U.S. senator from an urban state. The urban-state senator agrees to support the bill, if in return the farm-state senator supports a bill for a mass transit project. This situation is an example of

Accepted Answer

This situation is an example of political logrolling, where legislators exchange support for each other's bills to ensure both pieces of legislation pass.

Question 10

The Food, Conservation, and Energy Act of 2008 provided three main forms of cash commodity subsidies, including the following, except

Accepted Answer

The Food, Conservation, and Energy Act of 2008 included direct payments, countercyclical payments, and marketing loans as forms of cash commodity subsidies, but not cash rebates.

Question 11

Many members of Congress who represent urban low-income areas vote in favor of farm subsidies. In return, many representatives of agricultural areas support programs such as food stamps, which provide benefits for the urban poor. This situation would be an example of

Accepted Answer

This situation is an example of political logrolling, where legislators support each other's proposals to ensure their own proposals gain the necessary support, often involving trade-offs across different policy areas.

Question 12

A major criticism of the parity concept is that

Accepted Answer

The major criticism of the parity concept is that there is no economic rationale for the concept, meaning it lacks a solid theoretical foundation or justification in economic theory.

Question 13

Overproduction of farm products in the European Community has been primarily the result of

Accepted Answer

Subsidies to farmers in the European Community have led to overproduction of farm products by making it financially viable for farmers to produce more than the market demand. These subsidies can artificially inflate production levels, leading to surpluses.

Question 14

Through the Freedom to Farm Act of 1996, farmers were

Accepted Answer

The Freedom to Farm Act of 1996 aimed to phase out government support for farming over seven years, offering farmers declining annual "transition payments" to help them adjust to the new market-oriented system.

Question 15

The three types of farm subsidies under the Food, Conservation, and Energy Act of 2008 are

Accepted Answer

The Food, Conservation, and Energy Act of 2008, also known as the 2008 Farm Bill, includes three main types of farm subsidies: direct payments, countercyclical payments, and marketing loans. Direct payments are fixed annual payments to farmers based on historical acreage and yields, regardless of current market conditions. Countercyclical payments provide financial assistance to farmers when market prices for certain crops fall below target prices set by the government. Marketing loans offer farmers favorable terms on loans for storing crops until market conditions improve, allowing them to sell at better prices.

Question 16

Agricultural price supports have been criticized because they

Accepted Answer

Agricultural price supports often benefit large-scale farmers more than small farmers because larger operations can produce more and thus receive more support, exacerbating economic disparities within the agricultural sector.

Question 17

Which of the following is not a reason to predict that farm subsidies might decline in the future?

Accepted Answer

The special interest effect often leads to increased subsidies because small, well-organized groups (like farmers) benefit from subsidies and lobby for them, unlike the general public which is less organized and bears the cost. This does not predict a decline in farm subsidies.

Question 18

Farm policy in the U.S. has been heavily criticized for the following, except

Accepted Answer

Farm policy in the U.S. is primarily criticized for benefiting wealthier domestic farmers, being contradictory, and delaying the shift of resources away from agriculture, rather than benefiting foreign farmers.

Question 19

Public choice theory would suggest that the lobbying of Congress by farm organizations for legislation that would increase the appropriations from the U.S. government for agricultural programs is an example of

Accepted Answer

Public choice theory describes rent-seeking behavior as the activity of individuals or groups, such as farm organizations, lobbying the government for economic benefits they cannot secure through the market. In this case, lobbying Congress for increased appropriations for agricultural programs is a classic example of rent-seeking, as these organizations are seeking to gain financial advantages through political influence rather than through competitive market processes.

Question 20

The Freedom to Farm Act of 1996 was designed to encourage farmers to

Accepted Answer

The Freedom to Farm Act of 1996 aimed to decouple government subsidies from planting decisions, allowing farmers to make crop choices based on market demands rather than subsidy incentives, thereby encouraging them to respond to market prices.

Quiz 22: Agriculture: Economics and Policy