Question 1

A consequence of imposing a price floor is that

Accepted Answer

A price floor, set above the equilibrium price, leads to excess supply because the higher price encourages producers to supply more of the good than consumers are willing to buy at that price.

Question 2

Here's a taste of history: from 1775 to the present, U.S. agricultural productivity has grown because of all of the following except

Accepted Answer

The use of horses and mules (C) was indeed a factor in increasing agricultural productivity in the earlier part of this period, but the introduction of price ceilings on food goods (D) does not contribute to productivity growth. Price ceilings can limit the revenue that farmers receive for their products, potentially reducing their ability to invest in productivity-enhancing technologies or inputs.

Question 3

Because of ongoing changes in farm technology over the last two centuries, the average farm size in the U.S.

Accepted Answer

Technological advancements in agriculture have led to increased efficiency and productivity, allowing for larger farm sizes. As a result, fewer, larger farms can produce the same amount of agricultural output as many smaller farms could in the past, leading to a decrease in the number of farms.

Question 4

Farm productivity per acre grew most rapidly after

Accepted Answer

Farm productivity per acre grew most rapidly after World War II, due to advancements in agricultural technology, the widespread adoption of chemical fertilizers and pesticides, and improvements in farm machinery and irrigation techniques.

Question 5

Suppose the government believes that the equilibrium price established on the market by the forces of supply and demand is too low and, to correct it, sets a minimum price. That is to say, price is allowed to be higher, but it cannot be lower than that minimum. Economists call that minimum price a(n)

Accepted Answer

A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product. It is set above the equilibrium price, preventing the price from falling below a certain level.

Question 6

Here's a rather specific question concerning U.S. historical agricultural data. Which of the following increased fivefold from 1950 to 1980?

Accepted Answer

The use of chemical fertilizers per acre increased significantly from 1950 to 1980, reflecting advancements in agricultural technology and a shift towards more intensive farming practices.

Question 7

Agriculture's share of total output in the U.S. has declined throughout the 20th century, although the absolute value of farm output has increased. The number of U.S. farms grew in the early part of the century, then began to steadily fall. The number of U.S. farms peaked in which of the following decades?

Accepted Answer

The number of U.S. farms peaked in the 1930s, a period marked by the Great Depression, which saw a high number of small, family-owned farms. After this period, the trend shifted towards fewer but larger farms due to technological advances and changes in agricultural policy.

Question 8

The effect of improvements in food-producing technology can be shown graphically by

Accepted Answer

Improvements in food-producing technology typically increase the efficiency of food production, leading to a greater quantity of food being supplied at each price level. This is represented graphically by a rightward shift in the supply curve of food.

Question 9

When increases in the demand for food-shown as rightward shifts in the demand curve-are relatively small when compared to the increases in food supply-shown as right wardshifts in the supply curve-equilibrium price

Accepted Answer

When the increase in supply is greater than the increase in demand, the equilibrium price falls due to the excess supply, and the equilibrium quantity rises as more goods are available and sold at a lower price.

Question 10

In what decade did the U.S. government first decide to intervene in the farm economy?

Accepted Answer

The U.S. government first decided to intervene in the farm economy during the 1930s as part of the New Deal programs to address the economic hardships of the Great Depression.

Question 11

The government's decision to come to the aid of farmers was made, in part, because the government feared that

Accepted Answer

The government often intervenes in the agricultural sector to stabilize prices and prevent economic downturns that can affect broader sectors. Falling farm prices can lead to a depressed farm economy, which, in turn, can negatively impact other sectors of the economy. This concern motivates government aid to farmers.

Question 12

The intent of parity pricing in the farm industry is to

Accepted Answer

Parity pricing in the farm industry is intended to maintain farmers' purchasing power relative to nonfarmers by ensuring that prices for farm products are fair and comparable to historical prices, adjusted for inflation and changes in the cost of living. This helps ensure that farmers can maintain a standard of living comparable to those in other sectors.

Question 13

Economists use the term parity to describe government's farm policy because it conveys the meaning of

Accepted Answer

Parity in farm policy refers to the concept of equality, specifically ensuring that farmers receive a fair price for their products relative to their costs, maintaining their purchasing power over time.

Question 14

The benchmark, or reference, years used to calculate parity prices is

Accepted Answer

The benchmark years used to calculate parity prices are 1910-1914. Parity prices are a measure for adjusting prices farmers receive for their commodities to a level that is equivalent in purchasing power to a specific base period. The years 1910-1914 are often used as the reference period for these calculations in the United States.

Question 15

The 1910-1914 period was chosen as a benchmark period for determining parity prices because that was when

Accepted Answer

The 1910-1914 period was chosen as a benchmark for determining parity prices because it was a time when farmers believed that the prices of farm goods and nonfarm goods were in a fair exchange, meaning that farm goods traded for equal value with nonfarm goods. This period was seen as a point of equitable economic relations between agricultural and non-agricultural sectors.

Question 16

If Sam, a farmer in 1963, finds that he needs two bushels of corn to buy what his grandfather bought with one bushel during the 1910-1914 benchmark period, then

Accepted Answer

A price floor that provides parity should be double the 1963 market price to ensure that Sam can buy the same goods with two bushels as his grandfather did with one bushel, maintaining purchasing power parity.

Question 17

-A technological advance is shown in Exhibit F-2. It results in a

Accepted Answer

The answer of 
-A technological advance is shown in Exhibit...

Question 18

-After the technological change shown in Exhibit F-2, the government introduces a $5 price floor. This price floor creates an excess supply of

Accepted Answer

The answer of 
-After the technological change shown in Exhibit...

Question 19

-Suppose there is a technological change and the government does not intervene in the market of Exhibit F-2. Then farmers' revenue will

Accepted Answer

The correct answer is A because the technological change will increase the supply of wheat, which will lead to a decrease in the price of wheat. This will decrease farmers' revenue from $200 to $73.

Question 20

The parity price ratio is defined by the equation

Accepted Answer

The answer of The parity price ratio is defined by...

Quiz 6: Price Ceilings and Price Floors