Deck 22: Agriculture: Economics and Policy

Question 1

A bumper crop of farm products causes

A)only a slight decline in the price of farm products because the demand for farm products is income inelastic.
B)a large decline in the price of farm products because the demand for farm products is price inelastic.
C)only a slight decline in the price of farm products because the demand for farm products is income elastic.
D)a large decline in the price of farm products because the demand for farm products is price elastic.

Answer 1

a large decline in the price of farm products because the demand for farm products is price inelastic.

Question 2

Which of the following statements is correct?

A)The price support program hastened the exodus of resources from agriculture.
B)The main beneficiaries of government price support assistance were the very low income farmers.
C)If the demand for agricultural products is inelastic, a relatively small decrease in supply will increase gross farm incomes.
D)There is a misallocation of resources in rural America because of absolute and relative increases in the size of the farm population.

Answer 2

If the demand for agricultural products is inelastic, a relatively small decrease in supply will increase gross farm incomes.

Question 3

What percentage of their spending do U.S.consumers allocate to food purchases?

A)1 percent.
B)7 percent.
C)10 percent.
D)13 percent.

Answer 3

10 percent.

Question 4

Which of the following statements about U.S.agriculture is true as it relates to the past several decades?

A)The demand for farm products has declined, the supply of farm products has increased, and the price of farm products has declined.
B)The demand for farm products has become both more income elastic and more price elastic.
C)Minimum efficient scale has increased, the prices of farm products have declined, and the number of farms has declined.
D)The prices of farm products have increased, minimum efficient scale has declined, and the supply of farm products has been stagnant.

Question 5

Which of the following countries has the smallest percentage of its labor force employed in agriculture?

A)Madagascar
B)France
C)Brazil
D)United States

Question 6

Which of the following best describes the short-run problem faced by farms?

A)New technology has increased the productivity of farmers and therefore resulted in declining farm prices and low farm incomes.
B)The highly inelastic nature of agricultural demand, together with fluctuations in exports of farm goods, has caused small year-to-year fluctuations in farm output to result in highly unstable farm incomes.
C)The supply of farm products has increased relative to the demand for them, and because demand is inelastic, prices of farm output and farm income have therefore declined.
D)The demand for farm products has increased relative to their supply, but the elastic nature of agricultural demand has caused these shifts to result in declining farm incomes.

Question 7

In 2015, farm employment constituted about

A)15.8 percent of total employment.
B)1.1 percent of total employment.
C)1.5 percent of total employment.
D)2.4 percent of total employment.

Question 8

Which of the following statements best describes the demand for agricultural commodities?

A)It takes a small decline in price to induce a large increase in the amount of agricultural products demanded.
B)The marginal utility of additional units of agricultural output diminishes very rapidly.
C)Small increases in income cause demand to increase by a proportionately larger amount.
D)When price declines, the resulting substitution effect is very large.

Question 9

Which of the following is correct?

A)The rapid expansion of foreign incomes will reduce U.S.agricultural exports.
B)A decrease in the international value of the dollar will reduce U.S.agricultural exports.
C)An increase in the international value of the dollar will reduce U.S.agricultural exports.
D)Changes in the international value of the dollar have no effect on U.S.agricultural exports.

Question 10

Which of the following would, other things equal, reduce the demand for U.S.farm products?

A)poorer crops abroad
B)strong economic growth abroad
C)improved trade relations with China and Russia
D)appreciation of the U.S.dollar

Question 11

One consequence of the long-run problem faced by farms has been a

A)rapid increase in the price of farm output.
B)massive exit of workers from agriculture to other sectors of the economy.
C)smaller average farm size.
D)reduction in U.S.exports of farm products.

Question 12

The demand for most agricultural products is

A)elastic with respect to price but inelastic with respect to income.
B)inelastic with respect to price but elastic with respect to income.
C)elastic with respect to both price and income.
D)inelastic with respect to both price and income.

Question 13

Farm share of U.S.GDP has

A)declined from about 12 percent in 1950 to 1 percent today.
B)declined from about 12 percent in 1950 to 7 percent today.
C)declined from about 7 percent in 1950 to 1 percent today.
D)remained relatively stable over the past 50 years.

Question 14

If the demand for an agricultural product is inelastic, a bumper crop will

A)raise price and decrease total revenues.
B)raise price and increase total revenues.
C)lower price and decrease total revenues.
D)lower price and increase total revenues.

Question 15

Over time, technological change has

A)reduced both the price elasticity and income elasticity of the demand for farm products.
B)reduced the minimum efficient scale of production in agriculture and increased the prices of farm products.
C)increased both price elasticity and income elasticity of the demand for farm products.
D)increased the minimum efficient scale of production in agriculture and reduced the prices of farm products.

Question 16

Over the past several decades, farm employment has

A)grown absolutely but declined as a percentage of total employment.
B)declined both absolutely and as a percentage of total employment.
C)increased both absolutely and as a percentage of total employment.
D)declined absolutely but increased as a percentage of total employment.

Question 17

In the United States, "farm products" are generally produced in more markets, while "food products" tend to be sold in markets that are more .

A)monopolistic; competitive
B)competitive; oligopolistic
C)oligopolistic; competitive
D)oligopolistic; monopolistic

Question 18

The growing importance of export demand for American agriculture has

A)reduced the international value of the dollar.
B)had no significant effect on the stability of the demand for farm products.
C)destabilized the total demand for farm products.
D)stabilized the total demand for farm products.

Question 19

The demand for agricultural products is

A)relatively elastic with respect to price.
B)relatively inelastic with respect to price.
C)relatively elastic with respect to income.
D)downsloping to the individual farmer but perfectly elastic to farmers as a group.

Question 20

Which of the following best describes the main problem faced by farms in the long run?

A)Lagging technology has decreased the productivity of farmers and therefore resulted in low farm prices and incomes.
B)The highly inelastic nature of agricultural demand has caused small year-to-year fluctuations in farm output to result in highly unstable farm incomes.
C)The supply of farm products has increased relative to the demand for them, and, because demand is inelastic, farm prices and incomes have therefore declined.
D)The demand for farm products has increased relative to their supply, but the highly elastic nature of agricultural demand has caused these shifts to result in declining farm incomes.

Question 21

The Food, Conservation, and Energy Act of 2008

A)ended 60 years of U.S.price supports for American grain crops.
B)restored the U.S.price support system (for currently grown crops) that was ended in the Freedom to Farm Act of 1996.
C)ended the "freedom to plant" approach of the Freedom to Farm Act of 1996 and restored acreage allotments.
D)maintained the "freedom to plant" and "direct-payment" features of the Freedom to Farm Act of 1996, and also provided countercyclical payments and marketing loans to assist farmers.

Question 22

Which of the following statements best describes the parity concept?

A)The prices of farm commodities should vary inversely with changes in the prices-paid index for farmers.
B)Because of productivity increases, farmers are entitled to the same real income for a smaller volume of output.
C)The money incomes of farmers should always be the same, regardless of increases or decreases in the prices of the products they buy.
D)The production of a given real output entitles the producer to the same real income over time.

Question 23

Historically, many aspects of U.S.farm policies had their origins in the

A)Agricultural Extension Service Act.
B)Agricultural Adjustment Act.
C)Homestead Act.
D)Land Grant Act.

Question 24

In 1994, the world's trading nations agreed to

A)increase export subsidies to reduce world surpluses of farm products.
B)reduce agricultural subsidies and tariffs on agricultural imports.
C)eliminate all price supports for farm products.
D)create an international farm price support system to replace the price support systems of individual countries.

Question 25

The Food for Peace program is designed to

A)achieve 100 percent price parity for all farm products.
B)discover new uses for farm products through research and development.
C)take agricultural land out of the production of feed grains.
D)facilitate the distribution of surplus U.S.farm products in the developing countries.

Question 26

The purpose of the Freedom to Farm Act of 1996 was to

A)immediately end U.S.farm subsidies.
B)end 60 years of U.S.price supports for American grain crops.
C)eliminate U.S.tariffs and quotas on imported farm goods.
D)stabilize short-run crop prices.

Question 27

Price supports in agriculture have been criticized because they

A)have hastened the exodus of labor from agriculture.
B)subsidize consumers at the expense of farmers.
C)help large farmers more than small farmers.
D)create product shortages.

Question 28

If farm state legislators support the food-stamp program to aid the urban poor and urban state legislators in turn support farm subsidies, this is an example of

A)the special-interest effect.
B)political logrolling.
C)the paradox of voting.
D)cost-benefit analysis.

Question 29

The food-stamp program is designed to

A)increase the supply of farm products.
B)decrease the supply of farm products.
C)increase the demand for farm products.
D)decrease the demand for farm products.

Question 30

Which of the following statements is correct?

A)The parity ratio has not exceeded 100 in the 20th or 21st century.
B)An increase in prices paid by farmers relative to prices received by farmers will increase the parity ratio.
C)The parity ratio has generally been greater than 100 in the past four decades.
D)The parity ratio has generally declined over the past five decades.

Question 31

If the prices received by farmers increased and the prices paid by farmers also increased, the parity ratio

A)will necessarily be unchanged.
B)may either increase or decrease.
C)will necessarily increase.
D)will necessarily decline.

Question 32

An international agreement reached in 1994 by the world's trading nations provides for

A)an increase in export subsidies on agricultural products.
B)an increase in agricultural price supports.
C)a reduction of tariffs on agricultural products.
D)an international research organization designed to discover nonfood uses of agricultural output.

Question 33

Farm groups spend considerable amounts of money to maintain and enlarge political support for farm subsidies.This illustrates

A)coalitions.
B)rent-seeking activity.
C)the special-interest effect.
D)the voting paradox.

Question 34

Price supports

A)decrease pollution because participants must practice organic farming.
B)neither increase nor decrease environmental pollution.
C)increase pollution because supports encourage the cultivation of marginal land and the use of more pesticides and fertilizers.
D)discourage rent-seeking activity.

Question 35

Which of the following statements is correct?

A)Price supports may induce either an underallocation or an overallocation of resources to farm products.
B)Supported prices have no effect on the allocation of resources to farm products.
C)Supported prices induce an underallocation of resources to farm products.
D)Price supports induce an overallocation of resources to farm products.

Question 36

Import quotas on sugar may cost consumers $2 billion per year.But this quota goes unchallenged because the $10 average annual cost per person is so small that probably not one voter in 200 knows the quota exists.This statement describes

A)the voting paradox.
B)the special-interest effect.
C)the median-voter model.
D)free-rider problem.

Question 37

Which of the following arguments is not generally made to justify farm subsidies?

A)The "family farm" is an American institution that should be protected and nurtured.
B)Agribusiness firms need subsidies to achieve economies of scale.
C)Farmers sell their output in purely competitive markets but must buy inputs from imperfectly competitive firms.
D)Farmers cannot fully insure themselves against the risks unusual to farming, such as floods, droughts, and pests.

Question 38

The parity ratio

A)compares worker productivity in the farm and nonfarm sectors.
B)is the ratio of per capita farm income to per capita nonfarm income.
C)is the ratio of prices received by farmers to prices paid by farmers.
D)is the ratio of prices paid by farmers to prices received by farmers.

Question 39

Farm programs such as those of the United States and the European Union

A)are consistent with free world trade in agricultural products.
B)cause a misallocation of agricultural resources internationally.
C)cause the United States and the European Union to underproduce, while other nations overproduce, farm products.
D)raise productivity in developing nations.

Question 40

As applied to agriculture, the special-interest effect suggests that

A)urban legislators support farm legislation in exchange for rural legislators supporting urban-oriented legislation.
B)a relatively small number of farmers receive large benefits at the expense of a much larger group of taxpayers who individually suffer small losses.
C)politicians support farm subsidies because most of the associated costs are hidden rather than explicit.
D)the size of farm subsidies should vary directly with a farmer's earned income.

Question 41

(Last Word) The U.S.sugar program has

A)improved the world allocation of agricultural resources.
B)caused the world price of sugar to rise above its domestic price.
C)increased domestic sugar production.
D)lowered the incomes of U.S.sugar growers.

Question 42

About 10 percent of the U.S.labor force is in agriculture.

Question 43

Increases in incomes usually result in more than proportionate increases in the demand for agricultural products in a growing economy.

Question 44

Ward Planter exclusively grew soybeans from 2011 to 2013 and participated in the marketing loan program of the Food, Conservation, and Energy Act of 2008.If the "crop price" of soybeans at harvest was less than the preharvest "loan price," Planter could

A)sell his crop in the market and receive the difference between the crop price and loan price as a direct payment from the federal government.
B)take a "crop credit" based on the difference between the crop price and the loan price and use the credit to reduce federal income taxes owed.
C)receive an "emergency loan" that could be paid back over the following five years.
D)forfeit the harvest to the lender and be free of the loan, thus receiving a subsidy because the proceeds from the loan exceeded the revenues from the sale of the crop in the market.

Question 45

(Consider This) Which of the following has been an effect of the U.S.government's ethanol program?

A)Prices for crops such as soybeans and sorghum have fallen dramatically.
B)Prices for beef, pork, and chicken have risen.
C)Water use has declined, as corn is a less water-intensive crop.
D)All of these effects have resulted from the ethanol program.

Question 46

(Last Word) The U.S.sugar program

A)decreases the domestic price of sugar.
B)requires import quotas or tariffs on foreign sugar.
C)increases the export earnings of other sugar-producing countries.
D)aids developing countries that produce sugar.

Question 47

U.S.exports of farm products have generally declined as a percentage of U.S.farm output over the past half-century.

Question 48

From 2010 to 2012, Johnny Deer exclusively grew corn.Under the Food, Conservation, and Energy Act of 2008, Deer

A)was required to grow corn in the next year in order to receive direct payments from the federal government.
B)was allowed to grow whatever crop he wanted in the next year, but would only receive direct payments from the federal government if the price of corn fell below a targeted price.
C)was eligible to receive countercyclical payments if the price of corn fell below a targeted price, even though he did not grow corn in the next year.
D)had to grow something other than corn the next year to qualify for direct payments from the federal government.

Question 49

The Agricultural Act of 2014 does not address the fundamental problem of agricultural subsidies, which is that those subsidies

A)reduce work incentive for farmers, thus reducing agricultural production.
B)slow the exodus of resources from agriculture, increase production of agricultural products, and reduce crop prices and market incomes.
C)increase the exodus of resources from agriculture and reduce investments by farmers in land and equipment.
D)are based on past agricultural production and not on current agricultural production.

Question 50

Under the Food, Conservation, and Energy Act of 2008, subsidies to farmers based on gaps between actual prices of crops and targeted prices were called

A)direct payments.
B)price supports.
C)countercyclical payments.
D)price gap set-asides.

Question 51

(Consider This) Which of the following methods is used by farmers to "hedge" against short-run price and output fluctuations?

A)securing prices for their output in the futures market
B)purchasing crop revenue insurance to insure against natural disasters
C)leasing land to other farmers in return for stable rent payments
D)All of these risk-management techniques are used.

Question 52

In 2015, Farmer Levi grew only soybeans and received payments under the agricultural risk coverage program of the Agricultural Act of 2014.Which of the following best explains why Farmer Levi received these payments?

A)The price of soybeans fell below a specified threshold.
B)The total revenue of all farmers in the county fell below a specified threshold.
C)The total revenue by all soybean growers in the county fell below a specified threshold.
D)The total revenue of all soybean farmers participating in the program fell below a specified threshold.

Question 53

Which of the following was a feature of farm policy present in the Food, Conservation, and Energy Act of 2008 that was not part of the Freedom to Farm Act of 1996?

A)direct payments (direct subsidies) based on crops currently grown
B)countercyclical payments
C)farm buyouts by government
D)acreage allotments (restrictions on planting)

Question 54

Agriculture is overcrowded because of absolute and relative increases in the size of farm employment.

Question 55

(Consider This) Which of the following methods is commonly used by farmers to "smooth" income over time?

A)producing only one crop to benefit from specialization
B)renting land from other farmers to increase production
C)entering contracts with buyers of their farm output to assure themselves of a fixed price
D)All of these risk-management techniques are used to hedge against short-run price and output fluctuations.

Question 56

Farmers typically sell their products in highly competitive markets and buy in imperfectly competitive markets.

Question 57

If the demand for agricultural products is inelastic, a relatively small increase in supply will cause farm prices and incomes to decline.

Question 58

Irving Tiller received an insurance payment because his wheat crop sold for a price below an established threshold.Under the Agricultural Act of 2014, Tiller received payment under

A)direct payment coverage.
B)countercyclical payment coverage.
C)price loss coverage.
D)agricultural risk coverage.

Question 59

The Agricultural Act of 2014

A)ended 60 years of U.S.price supports for American grain crops.
B)eliminated the marketing loan program that was established by the Food, Conservation, and Energy Act of 2008.
C)ended the "freedom to plant" approach of the Freedom to Farm Act of 1996 and restored acreage allotments.
D)added two new crop insurance programs, agricultural risk coverage and price loss coverage.

Question 60

In 2015, Farmer Lactose’s dairy farm lost money.Under the Agricultural Act of 2014 dairy margin protection program, which of the following events would have triggered payments to Farmer Lactose?

A)only the price of milk falling too low
B)only the price of feed rising too high
C)either the price of milk falling too low or the price of feed rising too high
D)if the collective revenue of all dairy farmers in the county fell too low

Question 61

The agriculture industry includes both farm commodities and food products.Farm commodities are usually sold in

A)monopolistically competitive or oligopolistic markets, while food-product markets are highly competitive.
B)highly competitive markets, while food-product markets are monopolistically competitive or oligopolistic.
C)monopolistically competitive or oligopolistic markets.
D)markets dominated by large firms.

Question 62

Farm outputs' share of U.S.GDP from 1950 to the present has

A)stayed roughly constant at about 10 percent.
B)dropped from about 30 percent to 10 percent.
C)stayed roughly constant at about 30 percent.
D)dropped from about 7 percent to 1 percent.

Question 63

The inelastic demand for agricultural products means that relatively a small increase in supply will result in a relatively

A)large decrease in farm prices and total revenue for farmers.
B)small increase in farm prices and total revenue for farmers.
C)small decrease in farm prices and a relatively large increase in total revenue for farmers.
D)large increase in farm prices and a relatively small decrease in total revenue for farmers.

Question 64

Approximately what percentage of American consumers' total spending is on food?

A)about 10 percent
B)20-25 percent
C)about 30 percent
D)more than 40 percent

Question 65

Agricultural risk coverage guarantees payments to farmers when the price of their crop falls below a specific value.

Question 66

The use of price-support programs in agriculture has hastened the exodus of resources from agriculture.

Question 67

The concept of parity has provided a rationale for government price supports for farm products.

Question 68

If prices received by farmers decline and prices paid by farmers increase, the parity ratio will decline.

Question 69

The federal government has not paid subsidies to farmers since passage of the Freedom to Farm Act in 1996.

Question 70

If the prices of agricultural products fall, then the quantities demanded usually

A)do not increase by much because the price-changes are often small.
B)do not increase by much because there are no close substitutes.
C)increase significantly because the products satisfy basic needs.
D)increase significantly because the products have no close substitutes and are necessities.

Question 71

With a fixed level of farm production, a given shift in demand for a crop will cause a

A)small price change if demand is quite inelastic.
B)more dramatic price change if demand is quite elastic.
C)more dramatic price change if demand is quite inelastic.
D)similar amount of price change regardless of whether demand is elastic or not.

Question 72

It is estimated that the price elasticity coefficient for farm products is 0.2.Therefore, in order for consumers to increase their purchases of farm products by 10 percent, the prices of these products would have to fall

A)20 percent.
B)40 percent.
C)50 percent.
D)80 percent

Question 73

The Agricultural Act of 2014 expanded the direct payments, countercyclical payments, and marketing loans provided by the Food, Conservation, and Energy Act of 2008.

Question 74

Environmentalists generally support price supports because these subsidies motivate additional farm production.

Question 75

The Agricultural Act of 2014 created two new crop insurance programs, agricultural risk coverage and price loss coverage.

Question 76

The price elasticity of demand for food tends to be

A)higher in richer nations.
B)lower in richer nations.
C)the same in rich and poor nations.
D)unrelated to per capita wealth.

Question 77

The demand for agricultural products is quite inelastic, and this can be explained by

A)economies of scale and the substitution effect.
B)diminishing marginal returns and the income effect.
C)increasing marginal cost and the income effect.
D)the substitution effect and diminishing marginal utility.

Question 78

The principal beneficiaries of government agricultural aid have been the very low-income farmers.

Question 79

The Food, Conservation, and Energy Act of 2008 provided three types of agricultural subsidies: direct payments, countercyclical payments, and marketing loans.

Question 80

Suppose the demand for good X, an agricultural product, is price-inelastic.This means that small variations in the quantity of X produced will be associated with large variations in the

A)price of good X.
B)incomes of consumers of good X.
C)cost of producing good X.
D)quantity of good X exchanged.