Question 1

Discuss the benefits and opportunity costs of government farm subsidies.

Accepted Answer

Because farm prices are subject to such swings from high to low,our government,like many other countries,has tried to stabilize farm prices and thus farm incomes.These supports come at a price: consumers pay higher prices,government must store farm surpluses,and farm subsidies are a point of trade friction in international trade.In addition,these policies change the mix of output and waste scarce resources that could be used to produce other goods.

Question 2

Farming profits fell between 1979 and 1983 because of all of the following except

Accepted Answer

A) Declining land values. 
B) Rising interest rates. 
C) Increasing exports. 
D) Rising fuel prices. 
A) Declining land values. 
B) Rising interest rates. 
C) Increasing exports. 
D) Rising fuel prices. C

Question 3

Select the letter of the diagram in Figure 28.1 that best represents the effect of each event on the United States wheat market,ceteris paribus: Transport costs for farm products increase.(See Figure 29.4. )

Accepted Answer

A) a. 
B) b. 
C) c. 
D) d. 
A) a. 
B) b. 
C) c. 
D) d. A

Question 4

A weaker value of the U.S.dollar strengthens exports of American agricultural crops.

Accepted Answer

A) True 
 B)False

Question 5

Changes in weather cause abrupt shifts in the food supply curve that result in price fluctuations.

Accepted Answer

A) True 
 B)False

Question 6

Refer to Figure 29.2 for Farmer Smith with a price floor set above the market price.Assume the price support is located at the minimum point on the farmer's ATC curve.If this support is eliminated,all of the following will result except

Accepted Answer

A) Some farmers will leave the industry. 
B) Farmers will begin to lose money as the price returns to equilibrium. 
C) Fewer resources will be allocated to this market. 
D) The rate of return on invested capital will increase. 
A) Some farmers will leave the industry. 
B) Farmers will begin to lose money as the price returns to equilibrium. 
C) Fewer resources will be allocated to this market. 
D) The rate of return on invested capital will increase.

Question 7

Prior to 2001,if the market price of cotton was below the government's loan rate,

Accepted Answer

A) The cotton farmer received a loan deficiency payment and relinquished the crop to the CCC. 
B) The cotton farmer defaulted on the loan but kept the crop;the CCC kept the money. 
C) The cotton farmer,in effect,bought the crop from the CCC. 
D) The cotton farmer gave the crop to the CCC and was forced to exit the industry. 
A) The cotton farmer received a loan deficiency payment and relinquished the crop to the CCC. 
B) The cotton farmer defaulted on the loan but kept the crop;the CCC kept the money. 
C) The cotton farmer,in effect,bought the crop from the CCC. 
D) The cotton farmer gave the crop to the CCC and was forced to exit the industry.

Question 8

According to the text,which of the following items has the U.S.federal government subsidized for farmers?

Accepted Answer

A) Transportation. 
B) Migrant workers. 
C) Marketing. 
D) Seeds. 
A) Transportation. 
B) Migrant workers. 
C) Marketing. 
D) Seeds.

Question 9

Explain why the ratio of farm prices to nonfarm prices fell 60 percent between 1910-1914 and 2001.

Accepted Answer

The ratio of farm prices to nonfarm pric

Question 10

The major problems confronting U.S.agriculture are the downward trend in relative farm prices and abrupt short-term swings in prices.

Accepted Answer

A) True 
 B)False

Question 11

Explain why the prices of farm products are subject to abrupt short-term swings.

Accepted Answer

The prices of farm products are subject

Question 12

Farming profits are affected by all of the following costs except

Accepted Answer

A) Fuel costs. 
B) Fertilizer costs. 
C) Interest rates. 
D) Prices of clothing. 
A) Fuel costs. 
B) Fertilizer costs. 
C) Interest rates. 
D) Prices of clothing.

Question 13

The 1996 Farm Act did all of the following except

Accepted Answer

A) Eliminate target prices and deficiency payments. 
B) Refocus farm policy toward stabilizing farm incomes rather than prices. 
C) Eliminate many restrictions on acreage set-asides. 
D) Increase government regulation of farming. 
A) Eliminate target prices and deficiency payments. 
B) Refocus farm policy toward stabilizing farm incomes rather than prices. 
C) Eliminate many restrictions on acreage set-asides. 
D) Increase government regulation of farming.

Question 14

The Farm Security Act of 1985 included a gradual reduction in government support prices.

Accepted Answer

A) True 
 B)False

Question 15

The price elasticity of demand for soybeans is defined as the

Accepted Answer

A) Percentage change in quantity demanded of soybeans divided by the percentage change in the price of soybeans. 
B) Percentage change in quantity demanded of soybeans times the percentage change in soybean price. 
C) Unit change in soybean price divided by the unit change in quantity demanded of soybeans. 
D) Unit change in quantity demanded of soybeans times the unit change in the price of soybeans. 
A) Percentage change in quantity demanded of soybeans divided by the percentage change in the price of soybeans. 
B) Percentage change in quantity demanded of soybeans times the percentage change in soybean price. 
C) Unit change in soybean price divided by the unit change in quantity demanded of soybeans. 
D) Unit change in quantity demanded of soybeans times the unit change in the price of soybeans.

Question 16

Individual farmers maximize profit by producing the level of output at which

Accepted Answer

A) Marginal cost equals average cost. 
B) Marginal cost equals zero. 
C) Marginal cost equals price. 
D) Average cost equals zero. 
A) Marginal cost equals average cost. 
B) Marginal cost equals zero. 
C) Marginal cost equals price. 
D) Average cost equals zero.

Question 17

Whenever the market price for crops is below the Commodity Credit Corporation (CCC)loan rate,the government will end up buying surplus crops.

Accepted Answer

A) True 
 B)False

Question 18

Select the letter of the diagram in Figure 28.1 that best represents the effect of each event on the United States wheat market,ceteris paribus: The dollar increases in value in the foreign exchange markets.(See Figure 29.4. )

Accepted Answer

A) a. 
B) b. 
C) c. 
D) d. 
A) a. 
B) b. 
C) c. 
D) d.

Question 19

The Commodity Credit Corporation is a buyer of last resort for selected farm products.

Accepted Answer

A) True 
 B)False

Question 20

One World View article titled "EU Farm Subsidies" reports,"… France,Germany,and Switzerland all shield their farmers from international competition while subsidizing their exports." Which of the following shifts for agricultural products in international markets shows the effect of export subsidies?

Accepted Answer

A) The supply curve shifts to the right. 
B) The demand curve shifts to the right. 
C) The supply curve shifts to the left. 
D) The demand curve shifts to the left. 
A) The supply curve shifts to the right. 
B) The demand curve shifts to the right. 
C) The supply curve shifts to the left. 
D) The demand curve shifts to the left.

Exam 29: The Farm Problem

Discuss the benefits and opportunity costs of government farm subsidies.

Farming profits fell between 1979 and 1983 because of all of the following except

Select the letter of the diagram in Figure 28.1 that best represents the effect of each event on the United States wheat market,ceteris paribus: Transport costs for farm products increase.(See Figure 29.4. )

A weaker value of the U.S.dollar strengthens exports of American agricultural crops.

Changes in weather cause abrupt shifts in the food supply curve that result in price fluctuations.

Refer to Figure 29.2 for Farmer Smith with a price floor set above the market price.Assume the price support is located at the minimum point on the farmer's ATC curve.If this support is eliminated,all of the following will result except

Prior to 2001,if the market price of cotton was below the government's loan rate,

According to the text,which of the following items has the U.S.federal government subsidized for farmers?

Explain why the ratio of farm prices to nonfarm prices fell 60 percent between 1910-1914 and 2001.

The major problems confronting U.S.agriculture are the downward trend in relative farm prices and abrupt short-term swings in prices.

Explain why the prices of farm products are subject to abrupt short-term swings.

Farming profits are affected by all of the following costs except

The 1996 Farm Act did all of the following except

The Farm Security Act of 1985 included a gradual reduction in government support prices.

The price elasticity of demand for soybeans is defined as the

Individual farmers maximize profit by producing the level of output at which

Whenever the market price for crops is below the Commodity Credit Corporation (CCC)loan rate,the government will end up buying surplus crops.

Select the letter of the diagram in Figure 28.1 that best represents the effect of each event on the United States wheat market,ceteris paribus: The dollar increases in value in the foreign exchange markets.(See Figure 29.4. )

The Commodity Credit Corporation is a buyer of last resort for selected farm products.

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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