Question 1

The government inflates the demand for farm products

Accepted Answer

A) By purchasing surplus crops. 
B) Through marketing orders. 
C) Through acreage set-asides. 
D) With price supports. 
A) By purchasing surplus crops. 
B) Through marketing orders. 
C) Through acreage set-asides. 
D) With price supports.

Question 2

The 2001 amendment to the Commodity Credit Corporation (CCC)loan program tends to

Accepted Answer

A) Reduce upward price swings. 
B) Intensify upward price swings. 
C) Reduce downward price swings. 
D) aggravate downward price swings. 
A) Reduce upward price swings. 
B) Intensify upward price swings. 
C) Reduce downward price swings. 
D) aggravate downward price swings.

Question 3

Irrigation water delivered by federally funded reclamation projects is classified as

Accepted Answer

A) A farm cost subsidy. 
B) Parity prices. 
C) An income support program. 
D) A price support policy. 
A) A farm cost subsidy. 
B) Parity prices. 
C) An income support program. 
D) A price support policy.

Question 4

If a farmer sells a crop and uses some of the proceeds to repay the Commodity Credit Corporation (CCC),the market price is

Accepted Answer

A) Higher than the countercyclical payment. 
B) Lower than the loan rate. 
C) Lower than the countercyclical payment. 
D) Higher than the loan rate. 
A) Higher than the countercyclical payment. 
B) Lower than the loan rate. 
C) Lower than the countercyclical payment. 
D) Higher than the loan rate.

Question 5

Demand for U.S.farm products was high during World War I.

Accepted Answer

A) True 
 B)False

Question 6

Refer to Figure 29.3 for a cotton market with an equilibrium price of P1 and a Commodity Credit Corporation (CCC)loan rate set above P1.Given this situation,cotton farmers are most likely to

Accepted Answer

A) Sell their cotton on the market and repay the CCC loan with the proceeds plus other funds to make up the difference. 
B) Sell their cotton on the market and repay only a portion of the CCC loan. 
C) Give their cotton to the CCC and not repay the loan. 
D) Leave the cotton farming business. 
A) Sell their cotton on the market and repay the CCC loan with the proceeds plus other funds to make up the difference. 
B) Sell their cotton on the market and repay only a portion of the CCC loan. 
C) Give their cotton to the CCC and not repay the loan. 
D) Leave the cotton farming business.

Question 7

The Department of Agriculture distributes $150-$200 million a year to farmers to help defray the costs of fertilizer,drainage,and other production costs.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following would result from a price support program when the support price is set above the equilibrium price,ceteris paribus?

Accepted Answer

A) Output would decline. 
B) The price paid by consumers would rise. 
C) The consumption of the product would rise. 
D) Quality would deteriorate. 
A) Output would decline. 
B) The price paid by consumers would rise. 
C) The consumption of the product would rise. 
D) Quality would deteriorate.

Question 9

The 1996 Farm Act actually increased the level of government assistance to farmers.

Accepted Answer

A) True 
 B)False

Question 10

Refer to Figure 29.3 for a cotton market with an equilibrium price of P1 and a Commodity Credit Corporation (CCC)loan rate set above P1.If the CCC loan rate is increased,the

Accepted Answer

A) Surplus in the market will become larger. 
B) Surplus in the market will become smaller. 
C) Shortage in the market will become larger. 
D) Shortage in the market will become smaller. 
A) Surplus in the market will become larger. 
B) Surplus in the market will become smaller. 
C) Shortage in the market will become larger. 
D) Shortage in the market will become smaller.

Question 11

Explain why abrupt changes in farm output have a magnified effect on market prices.

Accepted Answer

Abrupt changes in farm output

Question 12

Wide price swings in farm products are the result of

Accepted Answer

A) Supply shifts and the relatively inelastic demand for food. 
B) Supply shifts and the relatively elastic demand for food. 
C) The high income elasticity of food demand. 
D) Demand shifts and the relatively elastic supply of food. 
A) Supply shifts and the relatively inelastic demand for food. 
B) Supply shifts and the relatively elastic demand for food. 
C) The high income elasticity of food demand. 
D) Demand shifts and the relatively elastic supply of food.

Question 13

In 2001 the U.S.Congress did all of the following except

Accepted Answer

A) Increase existing subsidies paid to farmers. 
B) Create new subsidy programs. 
C) Increase loan deficiency payments. 
D) Reduce acreage set-asides. 
A) Increase existing subsidies paid to farmers. 
B) Create new subsidy programs. 
C) Increase loan deficiency payments. 
D) Reduce acreage set-asides.

Question 14

If an individual farmer in a perfectly competitive agricultural market raises her price above the market price,the farmer will

Accepted Answer

A) Not sell any product. 
B) Earn greater total revenue. 
C) See other farmers follow the price rise. 
D) Earn greater total profit. 
A) Not sell any product. 
B) Earn greater total revenue. 
C) See other farmers follow the price rise. 
D) Earn greater total profit.

Question 15

The impact of price supports is to

Accepted Answer

A) Reduce the market price. 
B) Shift the demand curve for each farmer to the left. 
C) Increase the output of farmers. 
D) Decrease the output of farmers. 
A) Reduce the market price. 
B) Shift the demand curve for each farmer to the left. 
C) Increase the output of farmers. 
D) Decrease the output of farmers.

Question 16

Which of the following characterizes a competitive agricultural market?

Accepted Answer

A) The firm has a downward-sloping demand curve. 
B) The market has a horizontal demand curve. 
C) Price is determined by market demand and market supply. 
D) Economic profit is earned in the long run. 
A) The firm has a downward-sloping demand curve. 
B) The market has a horizontal demand curve. 
C) Price is determined by market demand and market supply. 
D) Economic profit is earned in the long run.

Question 17

Ceteris paribus,if the corn crop is 15 percent larger this year than it was last year,farmers will have to ________ the price of corn by ________ to sell the new crop.

Accepted Answer

A) raise;more than 15 percent 
B) reduce;more than 15 percent 
C) reduce;less than 15 percent 
D) reduce;exactly 15 percent 
A) raise;more than 15 percent 
B) reduce;more than 15 percent 
C) reduce;less than 15 percent 
D) reduce;exactly 15 percent

Question 18

Suppose European incomes increase by 4 percent per year,and as a result,U.S.exports of farm goods to Europe rise by 1 percent per year.The income elasticity that can be computed from this information is

Accepted Answer

A) 0.25. 
B) 4.0. 
C) 0.5. 
D) 2.0. 
A) 0.25. 
B) 4.0. 
C) 0.5. 
D) 2.0.

Question 19

Suppose a bumper wheat crop results in a 40 percent increase in output and sales,while the price elasticity of demand for wheat is about 0.8.Ceteris paribus,prices should

Accepted Answer

A) Rise by 8 percent. 
B) Fall by 8 percent. 
C) Rise by 50 percent. 
D) Fall by 50 percent. 
A) Rise by 8 percent. 
B) Fall by 8 percent. 
C) Rise by 50 percent. 
D) Fall by 50 percent.

Question 20

Individual farmers behave like perfect competitors but are still able to earn economic profits in the long run.

Accepted Answer

A) True 
 B)False

Exam 29: The Farm Problem

The government inflates the demand for farm products

The 2001 amendment to the Commodity Credit Corporation (CCC)loan program tends to

Irrigation water delivered by federally funded reclamation projects is classified as

If a farmer sells a crop and uses some of the proceeds to repay the Commodity Credit Corporation (CCC),the market price is

Demand for U.S.farm products was high during World War I.

Refer to Figure 29.3 for a cotton market with an equilibrium price of P1 and a Commodity Credit Corporation (CCC)loan rate set above P1.Given this situation,cotton farmers are most likely to

The Department of Agriculture distributes $150-$200 million a year to farmers to help defray the costs of fertilizer,drainage,and other production costs.

Which of the following would result from a price support program when the support price is set above the equilibrium price,ceteris paribus?

The 1996 Farm Act actually increased the level of government assistance to farmers.

Refer to Figure 29.3 for a cotton market with an equilibrium price of P1 and a Commodity Credit Corporation (CCC)loan rate set above P1.If the CCC loan rate is increased,the

Explain why abrupt changes in farm output have a magnified effect on market prices.

Wide price swings in farm products are the result of

In 2001 the U.S.Congress did all of the following except

If an individual farmer in a perfectly competitive agricultural market raises her price above the market price,the farmer will

The impact of price supports is to

Which of the following characterizes a competitive agricultural market?

Ceteris paribus,if the corn crop is 15 percent larger this year than it was last year,farmers will have to ________ the price of corn by ________ to sell the new crop.

Suppose European incomes increase by 4 percent per year,and as a result,U.S.exports of farm goods to Europe rise by 1 percent per year.The income elasticity that can be computed from this information is

Suppose a bumper wheat crop results in a 40 percent increase in output and sales,while the price elasticity of demand for wheat is about 0.8.Ceteris paribus,prices should

Individual farmers behave like perfect competitors but are still able to earn economic profits in the long run.

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

Filters

Refer to Figure 29.3 for a cotton market with an equilibrium price of P₁ and a Commodity Credit Corporation (CCC)loan rate set above P₁.Given this situation,cotton farmers are most likely to

Refer to Figure 29.3 for a cotton market with an equilibrium price of P₁ and a Commodity Credit Corporation (CCC)loan rate set above P₁.If the CCC loan rate is increased,the

Ceteris paribus,if the corn crop is 15 percent larger this year than it was last year,farmers will have to the price of corn by to sell the new crop.