Question 1

-Consider the above table. If the government imposes a price ceiling on strawberries of $8 per pound, what would be the likely result?
A) a surplus of 2,000 pounds of strawberries on the market
B) a shortage of 2,000 pounds of strawberries on the market
C) Market equilibrium will be reached.
D) The quantity demanded of strawberries would fall to zero.

Accepted Answer

The answer of 
-Consider the above table. If the government...

Question 2

Who ultimately benefits from price supports in agriculture?
A) consumers
B) grocery store owners
C) farmers
D) exporters

Accepted Answer

Price supports in agriculture are put in place by governments in order to protect farmers from fluctuations in market prices. This means that farmers receive a guaranteed minimum price for their crops, regardless of market conditions. As a result, they are able to earn a stable income and continue producing food for consumers. While consumers may benefit from stable prices, the primary beneficiaries of price supports are the farmers themselves.

Question 3

In the United States, government-imposed price supports are most often associated with
A) agricultural products.
B) industrial products.
C) consumer electronics.
D) commercial building products.

Accepted Answer

Government-imposed price supports are most commonly used in the agricultural sector to help stabilize farmers' incomes and ensure a reliable supply of food. These supports come in the form of subsidies, price floors, and other measures that help to keep prices from dropping too low. While some other industries may also receive government support in various forms, agricultural products are by far the most common recipients of price supports.

Question 4

If the government created a surplus of an agricultural product due to price supports, how might they dispose of this surplus?
A) give it away to a foreign country
B) purchase it and store it away
C) have the farmer destroy the crop
D) Any of these answers might be a successful tool in disposing of agricultural surpluses.

Accepted Answer

The best choice would depend on the specific circumstances, but any of these options could be used to dispose of surplus agricultural products. A government might choose to give the surplus away to a foreign country as a form of aid, purchase it and store it away for later use, or have the farmer destroy the crop in order to limit the supply and increase prices. Ultimately, the choice would depend on the government's goals for the surplus product and the most effective way to manage the market.

Question 5

What is the result of an agricultural support price established above the equilibrium price?
A) The market gravitates toward and remains in equilibrium.
B) There will be excess quantity supplied of the product involved.
C) There will be excess quantity demanded the product in this market.
D) Since the support price is set above the equilibrium price, it will have no impact on the market price.

Accepted Answer

When an agricultural support price is established above the equilibrium price, it creates an excess quantity supplied of the product involved as producers are incentivized to produce more at the higher price. This excess supply can lead to surpluses and potentially government intervention to purchase and store the excess supply.

Question 6

-Consider the above table. Assuming the government imposes a price ceiling on strawberries of $4 per pound, what would be the likely result?
A) a surplus of 2,000 pounds of strawberries
B) a shortage of 2,000 pounds of strawberries
C) No change, equilibrium would prevail.
D) The quantity demanded of strawberries would fall to zero.

Accepted Answer

A price ceiling set below the equilibrium price (assuming the equilibrium price is higher than $4) would result in a shortage because the quantity demanded would exceed the quantity supplied at that price point, leading to a shortage of 2,000 pounds if the numbers from the table indicate such a difference at the $4 price point.

Question 7

Which of the following will likely occur when price floors in agriculture are implemented?
A) Quantity supplied will exceed quantity demanded.
B) Quantity demanded will exceed quantity supplied.
C) Farmland will be underutilized.
D) Supply will decrease.

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 8

If the federal government sets a minimum price for wheat at $5.00 per bushel when the equilibrium price is $4.50, then
A) a surplus will be created causing the price to fall to the equilibrium price of $4.50.
B) a permanent surplus will develop because the government established the minimum price at $5.00.
C) a shortage will be created causing the price to rise to the equilibrium price of $4.50.
D) a permanent shortage will develop because the government established the minimum price at $5.00.

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 9

-Consider the above table. Assuming the government imposes a price floor on strawberries of $8 per pound, what would be the likely result?
A) a surplus of 2,000 pounds of strawberries
B) a shortage of 2,000 pounds of strawberries
C) No change, equilibrium would prevail.
D) The quantity demanded of strawberries would fall to zero.

Accepted Answer

A price floor set above the equilibrium price (which is not specified in the question but implied to be below $8) would result in a surplus because the price floor would increase the price above the equilibrium, leading to less quantity demanded and more quantity supplied than at the equilibrium price.

Question 10

When the government establishes a minimum price for an agricultural product above the equilibrium price, the government is creating a(n)
A) price ceiling.
B) elevated price.
C) price floor.
D) surplus price.

Accepted Answer

When the government establishes a minimum price for an agricultural product above the equilibrium price, the government is creating a price floor. This means that the price cannot fall below a certain level set by the government, which can lead to a surplus of supply and a potential loss of efficiency in the market.

Question 11

Government intervention in agriculture usually involves
A) price ceilings in order to keep food prices low.
B) price ceilings in order to subsidize U.S. exports.
C) price supports in order to keep farm incomes high.
D) price supports in order to keep agricultural imports low.

Accepted Answer

Government intervention in agriculture usually involves price supports in order to keep farm incomes high. This is often done through subsidies or other mechanisms that artificially raise the prices of agricultural goods. This is done in part to incentivize farmers to produce more, and in part to ensure that they are able to make a reasonable living despite the fact that prices for agricultural goods can be volatile. Price ceilings, by contrast, are more commonly used in other industries to keep prices low for consumers.

Question 12

When the government sets a price floor which is below the equilibrium price
A) a surplus will develop.
B) a shortage will develop.
C) the equilibrium price will be maintained.
D) a price ceiling will follow.

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 13

Agriculture price supports that establish a price floor at which agricultural products may be purchased that exceeds the market clearing price
A) create a shortage of agricultural products.
B) result in the quantity of these products supplied exceeding the quantity demanded at the floor price.
C) benefit taxpayers, who receive subsidies from producers that the price support program forces to sell to the government at an artificially established price.
D) benefit consumers, who are willing and able to purchase more agricultural products at the floor 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 14

-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
A) below P1.
B) at P1.
C) at P2.
D) at P3.

Accepted Answer

An effective price support must be set above the equilibrium price (P1) to ensure that the price is higher than what the market would naturally set, thus P3 is the correct choice.

Question 15

-Refer to the above figure. A price support set at P3 will
A) lead to a surplus of Q3 minus Q1.
B) lead to a shortage of Q3 minus Q1.
C) lead to an equilibrium quantity of Q2.
D) be ineffective.

Accepted Answer

Setting a price support above the equilibrium price (P3 in this case) results in a surplus because the quantity supplied (Q3) exceeds the quantity demanded (Q1).

Question 16

In which decade did the U.S. federal government first establish a system of agricultural price supports?
A) 1990s
B) 1970s
C) 1950s
D) 1930s

Accepted Answer

The U.S. federal government first established a system of agricultural price supports in the 1930s with the Agricultural Adjustment Act, which aimed to combat the effects of the Great Depression on farmers by paying them to reduce production and raise prices.

Question 17

Who gains and who loses from rent controls?

Accepted Answer

The answer of Who gains and who loses from rent...

Question 18

Finding an apartment in New York City is difficult. People even scan the obituaries in the hopes of finding an apartment. Provide an economic explanation for this.

Accepted Answer

The answer of Finding an apartment in New York City...

Question 19

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?
A) consumers, who purchase more units of the product than they did before the price support program was implemented
B) taxpayers, who no longer must provide funds to purchase surplus units of the product once the price support program is in place
C) producers, who earn a higher price on the sale of each unit and also sell more units, thereby unambiguously earning higher revenues
D) the government, which receives subsidy payments from producers that are required to sell more of the product at a higher price under the government's program

Accepted Answer

The group that benefits the most from a government price support program is the producers. By establishing a floor price for their product, they can earn higher revenue on each unit sold, and also sell more units. This is because the higher price makes it more profitable for producers to produce and sell the product. Consumers may see higher prices and possibly reduced quantity due to the decrease in supply. Taxpayers may see a decrease in funds needed to buy surplus units of the product, but they still have to pay for the price support program. The government may receive subsidy payments from producers, but this does not necessarily mean they benefit the most.

Question 20

One result of the agriculture price supports cited in the text is that
A) sometimes surplus food is given away.
B) food shortages result in most cases.
C) small farms receive most of the benefits.
D) none of the above.

Accepted Answer

The text mentions that sometimes surplus food is given away as a result of agriculture price supports. Therefore, option A is the correct answer. Option B is incorrect as it is the opposite of what is stated in the text. Option C is also incorrect as the text does not provide any information about which farms receive the benefits. Option D is incorrect because the text provides a specific result of agriculture price supports.

Quiz 4: Extensions of Demand and Supply Analysis

-Consider the above table. If the government imposes a price ceiling on strawberries of $8 per pound, what would be the likely result?

Who ultimately benefits from price supports in agriculture?

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

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

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

-Consider the above table. Assuming the government imposes a price ceiling on strawberries of $4 per pound, what would be the likely result?

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

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

-Consider the above table. Assuming the government imposes a price floor on strawberries of $8 per pound, what would be the likely result?

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

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

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

-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

-Refer to the above figure. A price support set at P3 will

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

Who gains and who loses from rent controls?

Finding an apartment in New York City is difficult. People even scan the obituaries in the hopes of finding an apartment. Provide an economic explanation for this.

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?

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