Question 1

What are price supports? When did the government begin using price supports?

Accepted Answer

The term price supports refers to price floors applied to farm commodities. It is the minimum price that the government allows farmers to receive for farm commodities like wheat or corn. The government began using them in the 1930s until major farm program reforms in the mid-1990s.

Question 2

Describe the purpose of the Food, Conservation, and Energy Act of 2008.

Accepted Answer

The Food, Conservation, and Energy Act of 2008 continued the freedom-to-plant approach and was composed of three subsidy programs. One program provided direct payments based on the farmer's previous crops planted. Another program provided countercyclical payments that paid the difference between market prices and target prices. The third was a marketing loan program that was based on a specific price and an option to either pay back the loan or forfeit the crop to the government lender.

Question 3

Refer to the graph of the market for wheat. The government adopts a price support program for wheat and supports the wheat price at P ₂. The area of 0 P ₂ AQ ₁ would measure the

Accepted Answer

A) total amount received by wheat farmers. 
B) total profits of wheat farmers. 
C) amount the government will pay to wheat farmers. 
D) amount private buyers of wheat will pay to wheat farmers. 
A) total amount received by wheat farmers. 
B) total profits of wheat farmers. 
C) amount the government will pay to wheat farmers. 
D) amount private buyers of wheat will pay to wheat farmers. D

Question 4

The Agricultural Act of 2018 ended the crop insurance programs created by the Agricultural Act of 2014.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

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. 
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 6

Refer to the table. If government adopts a price support program that sets the price at $9, then the total amount that private buyers would pay for this agricultural product is

Accepted Answer

A) $300. 
B) $900. 
C) $1,800. 
D) $2,700. 
A) $300. 
B) $900. 
C) $1,800. 
D) $2,700.

Question 7

Price support programs for agricultural products tend to cause shortages of these products.

Accepted Answer

A) True 
 B)False

Question 8

Explain why agriculture has become a declining industry over the past half century.

Accepted Answer

The two reasons agriculture is a declini

Question 9

A parity ratio of 1.2 in year A means that prices

Accepted Answer

A) received in year A could buy 120 percent as much as prices received in the base period. 
B) received in the base period could buy 120 percent as much as prices received in year A. 
C) received in year A had risen by 120 percent over the prices received in the base period. 
D) paid by farmers in year A had risen by 120 percent over the prices paid in the base period. 
A) received in year A could buy 120 percent as much as prices received in the base period. 
B) received in the base period could buy 120 percent as much as prices received in year A. 
C) received in year A had risen by 120 percent over the prices received in the base period. 
D) paid by farmers in year A had risen by 120 percent over the prices paid in the base period.

Question 10

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

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

Question 11

If in a certain year the indices of prices received and paid by farmers were 125 and 160, respectively, the parity ratio (in percentage terms)would be approximately

Accepted Answer

A) 128. 
B) 78. 
C) 65. 
D) 35. 
A) 128. 
B) 78. 
C) 65. 
D) 35.

Question 12

When increases in the supply of an agricultural product are much greater than the increases in demand for it over time, then the price

Accepted Answer

A) and quantity of agricultural products will increase. 
B) and quantity of agricultural products will decrease. 
C) of agricultural products will increase, but the quantity will decrease. 
D) of agricultural products will decrease, but the quantity will increase. 
A) and quantity of agricultural products will increase. 
B) and quantity of agricultural products will decrease. 
C) of agricultural products will increase, but the quantity will decrease. 
D) of agricultural products will decrease, but the quantity will increase.

Question 13

The 2014 Agriculture Act in the U.S. eliminated farm subsidies so as to encourage farmers to move their resources to nonfarming production activities.

Accepted Answer

A) True 
 B)False

Question 14

Refer to the diagram for the corn market. What effect will a price support of B have on the gross income of farmers?

Accepted Answer

A) Gross income will be unchanged, although profits will rise. 
B) Gross income will increase from 0 MFG to 0 BKL. 
C) Gross income will increase from 0 AJH to 0 BCG. 
D) Gross income will decrease from 0 BCG to 0 BKL. 
A) Gross income will be unchanged, although profits will rise. 
B) Gross income will increase from 0 MFG to 0 BKL. 
C) Gross income will increase from 0 AJH to 0 BCG. 
D) Gross income will decrease from 0 BCG to 0 BKL.

Question 15

The inelastic demand for agricultural products means that a(n)

Accepted Answer

A) decrease in price will increase farm incomes. 
B) increase in price will decrease farm incomes. 
C) decrease in price will decrease farm incomes. 
D) increase in price will not change farm incomes. 
A) decrease in price will increase farm incomes. 
B) increase in price will decrease farm incomes. 
C) decrease in price will decrease farm incomes. 
D) increase in price will not change farm incomes.

Question 16

The Food, Conservation, and Energy Act of 2008 provided three main forms of cash commodity subsidies, including the following, except

Accepted Answer

A) direct payments. 
B) cash rebates. 
C) countercyclical payments. 
D) marketing loans. 
A) direct payments. 
B) cash rebates. 
C) countercyclical payments. 
D) marketing loans.

Question 17

The relative price inelasticity of demand for agricultural products has resulted in

Accepted Answer

A) prices fluctuating more in agriculture than in other industries. 
B) prices fluctuating less in agriculture than in other industries. 
C) higher prices for agricultural products. 
D) lower prices for agricultural products. 
A) prices fluctuating more in agriculture than in other industries. 
B) prices fluctuating less in agriculture than in other industries. 
C) higher prices for agricultural products. 
D) lower prices for agricultural products.

Question 18

The inelastic demand for agricultural products means that

Accepted Answer

A) large changes in agricultural production result in no change in farm prices and incomes. 
B) small changes in agricultural production result in no change in farm prices and incomes. 
C) large changes in agricultural production result in relatively smaller changes in farm prices and incomes. 
D) small changes in agricultural production result in relatively larger changes in farm prices and incomes. 
A) large changes in agricultural production result in no change in farm prices and incomes. 
B) small changes in agricultural production result in no change in farm prices and incomes. 
C) large changes in agricultural production result in relatively smaller changes in farm prices and incomes. 
D) small changes in agricultural production result in relatively larger changes in farm prices and incomes.

Question 19

When critics of U.S. farm policy say that it treats symptoms rather than causes, they mean that the

Accepted Answer

A) policy attempts to bolster low farm income, while the real problem is an overallocation of resources to agriculture. 
B) policy deals with the overallocation of resources to agriculture, while the basic farm problem is low incomes. 
C) policy attempts to bolster low farm incomes, while the real problem is an underallocation of resources to agriculture. 
D) restriction of output in the short run may reduce productive capacity in agriculture in the long run. 
A) policy attempts to bolster low farm income, while the real problem is an overallocation of resources to agriculture. 
B) policy deals with the overallocation of resources to agriculture, while the basic farm problem is low incomes. 
C) policy attempts to bolster low farm incomes, while the real problem is an underallocation of resources to agriculture. 
D) restriction of output in the short run may reduce productive capacity in agriculture in the long run.

Question 20

The increase in the productivity of U.S. farmers has caused

Accepted Answer

A) more people to be attracted to farming. 
B) a decrease in the size of the average farm. 
C) a reduction in the number of people in farming. 
D) a reduction in the surpluses produced by farmers. 
A) more people to be attracted to farming. 
B) a decrease in the size of the average farm. 
C) a reduction in the number of people in farming. 
D) a reduction in the surpluses produced by farmers.

Exam 22: Agriculture: Economics and Policy

What are price supports? When did the government begin using price supports?

Describe the purpose of the Food, Conservation, and Energy Act of 2008.

Refer to the graph of the market for wheat. The government adopts a price support program for wheat and supports the wheat price at P ₂. The area of 0 P ₂ AQ ₁ would measure the

The Agricultural Act of 2018 ended the crop insurance programs created by the Agricultural Act of 2014.

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

Refer to the table. If government adopts a price support program that sets the price at $9, then the total amount that private buyers would pay for this agricultural product is

Price support programs for agricultural products tend to cause shortages of these products.

Explain why agriculture has become a declining industry over the past half century.

A parity ratio of 1.2 in year A means that prices

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

If in a certain year the indices of prices received and paid by farmers were 125 and 160, respectively, the parity ratio (in percentage terms)would be approximately

When increases in the supply of an agricultural product are much greater than the increases in demand for it over time, then the price

The 2014 Agriculture Act in the U.S. eliminated farm subsidies so as to encourage farmers to move their resources to nonfarming production activities.

Refer to the diagram for the corn market. What effect will a price support of B have on the gross income of farmers?

The inelastic demand for agricultural products means that a(n)

The Food, Conservation, and Energy Act of 2008 provided three main forms of cash commodity subsidies, including the following, except

The relative price inelasticity of demand for agricultural products has resulted in

The inelastic demand for agricultural products means that

When critics of U.S. farm policy say that it treats symptoms rather than causes, they mean that the

The increase in the productivity of U.S. farmers has caused

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, RD, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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