Question 1

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

Accepted Answer

All of the given risk-management techniques are used by farmers to hedge against short-run price and output fluctuations. Securing prices for their output in the futures market helps them lock in a price for their crops in advance, while purchasing crop revenue insurance provides coverage against natural disasters. Leasing land to other farmers in return for stable rent payments can also help farmers stabilize their income. Therefore, D is the best choice.

Question 2

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

Accepted Answer

Increases in incomes usually result in less than proportionate increases in the demand for agricultural products due to the Engel's Law, which states that as income rises, the proportion of income spent on food decreases, even if actual expenditure on food increases.

Question 3

The Agricultural Act of 2014

Accepted Answer

The Agricultural Act of 2014 added two new crop insurance programs, agricultural risk coverage and price loss coverage. The other choices are incorrect statements about the act.

Question 4

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

Accepted Answer

The U.S. sugar program is designed to provide support to domestic sugar growers by limiting imports and providing subsidies. As a result, domestic sugar production has increased under this program. However, this has also resulted in higher costs for consumers and lower profits for sugar-using industries. The program has not improved the world allocation of agricultural resources, as it distorts global sugar markets by keeping prices artificially high in the U.S. compared to the rest of the world. It has also not caused the world price of sugar to rise above its domestic price, as the opposite is true. Lastly, the program has not lowered the incomes of U.S. sugar growers, as it is specifically designed to provide them with support.

Question 5

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

Accepted Answer

The U.S. sugar price support program has artificially increased the price of sugar in the U.S. through measures such as tariffs and import quotas. This has resulted in higher costs for U.S. consumers, who have paid an estimated $3.5 billion per year in higher prices, while U.S. sugar producers have benefited from the higher prices. However, the program has not been effective at increasing domestic sugar production, and has led to increased sugar imports as a percentage of U.S. sugar consumption. Therefore, choice A is the best answer.

Question 6

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

Accepted Answer

The answer of U.S. exports of farm products have generally...

Question 7

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

Accepted Answer

The U.S. government's ethanol program has increased demand for corn, which is used to produce ethanol. This has led to higher corn prices, which in turn have increased the cost of feed for livestock, resulting in higher prices for beef, pork, and chicken.

Question 8

(Last Word) The U.S. sugar program

Accepted Answer

The U.S. sugar program requires import quotas or tariffs on foreign sugar, which raises the price of imported sugar and protects domestic sugar producers. This policy has been controversial, as it limits competition and increases prices for consumers. While it benefits U.S. sugar producers, it may not benefit producers in developing countries who struggle to access the U.S. market. It also does not directly decrease the domestic price of sugar or increase the export earnings of other sugar-producing countries.

Question 9

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?

Accepted Answer

The dairy margin protection program helps farmers when the difference between the price of milk and the cost of feed falls below a certain threshold. Therefore, payments would have been triggered if either the price of milk fell too low or the price of feed rose too high.

Question 10

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

Accepted Answer

Agriculture is often considered overcrowded not because of increases in farm employment, but due to limited non-farm employment opportunities, leading to a relative surplus of labor in agriculture compared to other sectors.

Question 11

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

Accepted Answer

According to the Bureau of Labor Statistics, only about 1.5% of the U.S. labor force is directly employed in agriculture. However, if you include related industries such as food manufacturing and distribution, the percentage increases to around 10%.

Question 12

(Consider This) In part as a result of the U.S. government's ethanol program, between 2005 and 2012 the inflation-adjusted price of a bushel of corn

Accepted Answer

The U.S. government's ethanol program increased the demand for corn, which led to a significant rise in its price, approximately tripling between 2005 and 2012.

Question 13

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?

Accepted Answer

The Agricultural Risk Coverage (ARC) program provides payments when the actual revenue for a crop falls below a specified guarantee, which is based on county-level revenue for that crop.

Question 14

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

Accepted Answer

The Agricultural Act of 2014 continues to support subsidies that can lead to overproduction, lower crop prices, and reduced market incomes by slowing the movement of resources out of agriculture.

Question 15

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

Accepted Answer

Entering contracts with buyers of their farm output to assure themselves of a fixed price is a commonly used technique by farmers to "smooth" income over time. This helps them to hedge against short-run price and output fluctuations, as they have a fixed price agreement with the buyer. Options A and B are not effective methods to manage price and output fluctuations, as they may lead to an over-reliance on one crop or landowner, respectively, which could increase risk. Option D is not the best choice, as it includes all the given options, which may not necessarily be equally effective or commonly used by farmers.

Question 16

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

Accepted Answer

The subsidies mentioned in the question, which are based on the gap between actual prices of crops and targeted prices, are countercyclical payments. Direct payments are subsidies that are paid regardless of market conditions, price supports are subsidies based on a fixed target price, and price gap set-asides do not exist as a type of subsidy program.

Question 17

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

Accepted Answer

Under the Food, Conservation, and Energy Act of 2008, farmers were eligible for countercyclical payments if the price of a commodity like corn fell below a targeted price, regardless of whether they grew that crop in the following year.

Question 18

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

Accepted Answer

Irving Tiller received payment due to the price of his wheat crop falling below an established threshold, indicating a loss in revenue. This aligns with the price loss coverage (PLC) program under the Agricultural Act of 2014, which compensates farmers for market downturns that result in lower revenue for their crops. Direct payment coverage is a program that provided payments to farmers regardless of market conditions, countercyclical payment coverage compensates farmers when prices fall below a targeted level, and agricultural risk coverage provides assistance for losses due to natural disasters. None of these programs apply to Tiller's situation as described.

Question 19

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?

Accepted Answer

Countercyclical payments were added in the Food, Conservation, and Energy Act of 2008 and were not present in the Freedom to Farm Act of 1996, which only provided for direct payments based on historical production levels. A, C, and D were all features present in both acts.

Question 20

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

Accepted Answer

If the crop price is less than the preharvest loan price, Planter can 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. This is a common practice among farmers participating in the marketing loan program.

Quiz 22: Agriculture: Economics and Policy