Question 1

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 2

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

Accepted Answer

A price ceiling of $4 is below the equilibrium price, leading to a higher quantity demanded than supplied, resulting in a shortage.

Question 3

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 of 1933, in response to the Great Depression and the resulting drop in agricultural prices. The act aimed to stabilize prices by paying farmers to reduce their crop acreage, thereby reducing supply and increasing prices.

Question 4

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 done through various means like subsidies, loans, and direct payments to farmers. The aim is to ensure that farmers receive a fair price for their products and are able to sustain their livelihoods. Price ceilings or price supports to keep agricultural imports low are not typically used by governments as they could potentially violate international trade agreements.

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 artificial floor for the price, which will incentivize suppliers to produce more of the product than consumers are willing to buy at that price. This results in excess quantity supplied, and this surplus can lead to storage costs, waste, or government interventions to reduce the oversupply.

Question 6

Which of the following is most likely to benefit from government established price floors in agriculture?
A) large farm owners and corporate farms
B) small farmers
C) cattle ranchers
D) low income farmers

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 7

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 often associated with agricultural products, particularly crops such as corn, wheat, and soybeans. These price supports aim to stabilize agricultural markets by ensuring that farmers receive a minimum price for their goods, even if market prices would otherwise be lower. This can help to ensure the financial stability of the agricultural sector and prevent fluctuations in prices that could disrupt supply chains and negatively impact consumers.

Question 8

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

Accepted Answer

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

Question 9

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

When the government sets a minimum price above the equilibrium price, it creates a surplus because producers are incentivized to produce more wheat than consumers are willing to buy at that price. This surplus will not sell unless the government purchases the excess at the minimum price, which creates a cost for taxpayers. The surplus will persist because producers have no incentive to reduce production and consumers have little incentive to consume more at the higher price. Therefore, a permanent surplus will develop because of the minimum price.

Question 10

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

Price supports can lead to an overproduction of certain crops, resulting in a surplus of food. To manage this surplus, sometimes the government will give away or sell the excess food at discounted prices.

Question 11

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 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

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 to protect farmers by providing them with a minimum price for their crops or products, regardless of market demand. This ensures that farmers can make a profit and continue to produce food for consumers. While consumers may benefit from stabilized food prices, the primary purpose of price supports is to benefit farmers.

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  .
B) at  .
C) at  .
D) at  .

Accepted Answer

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

Question 15

-Consider the above table. Assuming the government imposes a price floor on garbanzo beans of $8, what would be the likely result?
A) a surplus of 2000 garbanzo beans
B) a shortage of 2000 garbanzo beans
C) no change, equilibrium would prevail
D) The quantity demanded of garbanzo beans would fall to zero.

Accepted Answer

A price floor set above the equilibrium price leads to a surplus because the quantity supplied exceeds the quantity demanded at that price.

Question 16

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

Producers benefit the most from a government price support program as they receive a higher price on the sale of each unit and can sell more units, thus generating higher revenues. Consumers may end up paying a higher price for the product, while taxpayers may have to bear the cost of the subsidy payments to producers. The government merely enforces the program and does not benefit directly from it.

Question 17

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.
A) been abolished
B) been maintained
C) increased to the level of EU price supports
D) been made a function of tax revenues

Accepted Answer

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

Question 18

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, it creates a price floor. This is because the price cannot fall below the set minimum price, which creates a surplus of the product as producers are incentivized to produce more at the higher price level, but consumers are discouraged from purchasing the product at the inflated price.

Question 19

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 20

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

Accepted Answer

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

Quiz 4: Extensions of Demand and Supply Analysis

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

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

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

Government intervention in agriculture usually involves

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

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

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

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

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

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

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

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

Who ultimately benefits from price supports in agriculture?

-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

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

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?

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.

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

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

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