Question 1

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

Accepted Answer

Price-support programs in agriculture are designed to stabilize or increase agricultural income, which can make farming more economically viable and potentially slow the movement of resources away from agriculture.

Question 2

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

Accepted Answer

The Food, Conservation, and Energy Act of 2008 did indeed provide these three types of agricultural subsidies.

Question 3

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

Accepted Answer

The Agricultural Act of 2014 repealed the direct payments and countercyclical payments provided by the Food, Conservation, and Energy Act of 2008 and replaced them with new programs such as Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC). However, the marketing loan programs were expanded by the Agricultural Act of 2014.

Question 4

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

Accepted Answer

The concept of parity is the idea that farmers should receive a price for their goods that is equivalent to what they would have received at an earlier time, adjusted for inflation. This has led to governments implementing price supports for farm products in order to maintain this parity and ensure that farmers can earn a living wage.

Question 5

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

Accepted Answer

Most government agricultural aid, especially in developed countries, tends to benefit large-scale farmers and agribusinesses more than very low-income or small-scale farmers, due to the structure of the subsidies and the requirements to access them.

Question 6

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

Accepted Answer

The statement is false. The federal government still pays subsidies to farmers, but the method and amount of subsidies has changed since the passage of the Freedom to Farm Act in 1996.

Question 7

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

Accepted Answer

If the demand for a product is inelastic, it means that a change in supply will have a relatively larger impact on the price. Therefore, if supply increases, prices are likely to fall, which will have a negative effect on farm incomes.

Question 8

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

Accepted Answer

This is because farmers often have less market power as they are price takers in the market for their goods, while the markets for inputs such as fertilizer or machinery may be dominated by a few large suppliers who can influence prices.

Question 9

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

Accepted Answer

When demand is inelastic, a shift in demand leads to a larger change in price because consumers are less responsive to price changes, meaning quantity demanded doesn't change much.

Question 10

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

Accepted Answer

The answer of It is estimated that the price elasticity...

Question 11

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

Accepted Answer

The demand for agricultural products is quite inelastic because of the combination of the substitution effect and diminishing marginal utility. The substitution effect suggests that consumers may not be able to easily switch to other products when the price of a particular agricultural product rises. Additionally, the diminishing marginal utility of such products means that consumers will continue to demand them even as their prices increase, as they provide high levels of satisfaction or utility.

Question 12

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

Accepted Answer

The parity ratio measures the relationship between the prices received by farmers for their products and the prices farmers pay for their inputs (such as seed, fertilizer, equipment, etc.). If the prices received by farmers decrease and the prices paid by farmers increase, the ratio will decline. This indicates a decrease in profitability for farmers, as they are receiving less income for their products but paying more for the inputs needed to produce them.

Question 13

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

Accepted Answer

Farm commodities, such as grains and livestock, are often sold in highly competitive commodity markets where there are many buyers and sellers and prices are determined by supply and demand. Food products, on the other hand, are often differentiated by brand and are sold in monopolistically competitive or oligopolistic markets where a few large firms dominate the market. For example, the cereal industry is dominated by a few large companies, such as Kellogg's and General Mills, which can differentiate their products through branding and marketing.

Question 14

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

Accepted Answer

The share of farm outputs in U.S. GDP has decreased significantly from about 7 percent in 1950 to around 1 percent in recent years, reflecting the growth of other sectors and increased agricultural productivity.

Question 15

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

Accepted Answer

The answer of Agricultural risk coverage guarantees payments to farmers...

Question 16

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

Accepted Answer

Environmentalists generally do not support price supports because they can lead to overproduction and environmental harm, as well as encouraging monoculture and reducing biodiversity.

Question 17

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

Accepted Answer

When demand is price-inelastic, consumers are not very responsive to price changes, so small changes in quantity lead to large changes in price to balance supply and demand.

Question 18

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

Accepted Answer

American consumers typically spend about 10 percent of their total expenditures on food, according to data from the U.S. Bureau of Labor Statistics.

Question 19

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

Accepted Answer

The answer of If the prices of agricultural products fall,...

Question 20

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

Accepted Answer

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

Quiz 22: Agriculture: Economics and Policy