Question 1

Stating that income elasticity of demand for potatoes equals 0.15 is equivalent to stating that if income

Accepted Answer

A)  decreases by 10 percent, potato purchases decrease by 1.5 percent. 
B)  increases by 10 percent, potato purchases increase by 15 percent. 
C)  decreases by 1.5 percent, potato purchases decrease by 10 percent. 
D)  increases by 15 percent, potato purchases decrease by 10 percent. 
E)  none of the above 
A)  decreases by 10 percent, potato purchases decrease by 1.5 percent. 
B)  increases by 10 percent, potato purchases increase by 15 percent. 
C)  decreases by 1.5 percent, potato purchases decrease by 10 percent. 
D)  increases by 15 percent, potato purchases decrease by 10 percent. 
E)  none of the above

Question 2

Exhibit 39-4
  
-Refer to Exhibit 39-4.At a target price of $4 per bushel,what price does the consumer pay?

Accepted Answer

A)  $5 
B)  $4 
C)  $3 
D)  $2 
A)  $5 
B)  $4 
C)  $3 
D)  $2

Question 3

The major way that the government supports crop prices is by granting nonrecourse loans to farmers.

Accepted Answer

A) True 
 B)False

Question 4

A farmer has 500 acres on which he has previously grown corn.His yield per acre is 100 bushels of corn.If his production flexibility contract payment is $21,250,then what is the corn payment rate?

Accepted Answer

A)  $0.45 
B)  $0.67 
C)  $0.50 
D)  $0.10 
E)  There is not enough information to answer the question. 
A)  $0.45 
B)  $0.67 
C)  $0.50 
D)  $0.10 
E)  There is not enough information to answer the question.

Question 5

Which of the following statements is true?

Accepted Answer

A)  Bad weather isn't always that bad for farmers' incomes. 
B)  An individual farmer would probably increase his revenues if he experienced good weather and other farmers experienced bad weather. 
C)  Price elasticity of demand is a relevant factor to a farmer's income. 
D)  a and b 
E)  a, b, and c 
A)  Bad weather isn't always that bad for farmers' incomes. 
B)  An individual farmer would probably increase his revenues if he experienced good weather and other farmers experienced bad weather. 
C)  Price elasticity of demand is a relevant factor to a farmer's income. 
D)  a and b 
E)  a, b, and c

Question 6

Exhibit 39-4
  
-Refer to Exhibit 39-4.The price elasticity of demand for wheat between the prices of $3 and $4 is

Accepted Answer

A)  equal to 1. 
B)  less than 1. 
C)  greater than 1. 
D)  equal to 100. 
E)  c and d 
A)  equal to 1. 
B)  less than 1. 
C)  greater than 1. 
D)  equal to 100. 
E)  c and d

Question 7

In 2000,farmers in the United States represented approximately what percentage of the population?

Accepted Answer

A)  8 percent 
B)  25 percent 
C)  1 percent 
D)  5 percent 
A)  8 percent 
B)  25 percent 
C)  1 percent 
D)  5 percent

Question 8

Exhibit 39-7
  
-Refer to Exhibit 39-7.Let E1 represent the initial equilibrium in the market for X.Population growth combined with the widely publicized results of medical research extolling the virtues of consuming X will,ceteris paribus,result in a new equilibrium at

Accepted Answer

A)  E2. 
B)  E3. 
C)  E4. 
D)  E5. 
E)  E4 or E5, depending on the extent of income elasticity of demand. 
A)  E2. 
B)  E3. 
C)  E4. 
D)  E5. 
E)  E4 or E5, depending on the extent of income elasticity of demand.

Question 9

One unintended consequence of the various attempts to restrict farm acreage was that

Accepted Answer

A)  output generally decreased, price increased, and farmers earned higher incomes. 
B)  individual farmers intensified their efforts to harvest crops from the land still under cultivation. 
C)  farmers' incomes remained constant in real terms. 
D)  the land that was set aside became less productive. 
A)  output generally decreased, price increased, and farmers earned higher incomes. 
B)  individual farmers intensified their efforts to harvest crops from the land still under cultivation. 
C)  farmers' incomes remained constant in real terms. 
D)  the land that was set aside became less productive.

Question 10

The price of a foodstuff falls and the total revenue (received by farmers for selling the foodstuff)rises.What could explain this?

Accepted Answer

A)  Increased supply and elastic demand. 
B)  Real income rises and the foodstuff is an inferior good. 
C)  Real income rises and the foodstuff is a normal good. 
D)  Increased supply and inelastic demand. 
E)  none of the above 
A)  Increased supply and elastic demand. 
B)  Real income rises and the foodstuff is an inferior good. 
C)  Real income rises and the foodstuff is a normal good. 
D)  Increased supply and inelastic demand. 
E)  none of the above

Question 11

Exhibit 39-2
  
-Refer to Exhibit 39-2.Given a target price of P?,what is the total deficiency payment made by the government?

Accepted Answer

A)  (P1 - P2) x Q2 
B)  (P1 - P0) x Q2 
C)  P1 x Q1 
D)  P0 x Q0 
A)  (P1 - P2) x Q2 
B)  (P1 - P0) x Q2 
C)  P1 x Q1 
D)  P0 x Q0

Question 12

Demand for a food item increases by more than the supply of the food item.One thing for certain is that

Accepted Answer

A)  the price of the food item rises. 
B)  income elasticity of demand (for the food item) is greater than 1. 
C)  the supply curve is price elastic. 
D)  real income rises as a result. 
E)  none of the above 
A)  the price of the food item rises. 
B)  income elasticity of demand (for the food item) is greater than 1. 
C)  the supply curve is price elastic. 
D)  real income rises as a result. 
E)  none of the above

Question 13

Suppose iceberg lettuce has an income elasticity of demand of 0.35.A 10 percent increase in income causes the quantity demanded of iceberg lettuce to _______________ by ______________ percent.

Accepted Answer

A)  rise; 3.5 
B)  rise; 28.57 
C)  fall; 28.57 
D)  fall; 3.5 
A)  rise; 3.5 
B)  rise; 28.57 
C)  fall; 28.57 
D)  fall; 3.5

Question 14

Exhibit 39-8
  
-Refer to Exhibit 39-8.Assume that E1 represents the initial equilibrium in the market for grain X.As a result of increased agricultural productivity,total revenues for farmers in this market will

Accepted Answer

A)  increase if the demand curve is perfectly inelastic. 
B)  increase if the demand curve is inelastic between E1 and E2. 
C)  decrease if the demand curve is inelastic between E1 and E2. 
D)  decrease if the demand curve is inelastic between E1 and E3. 
E)  none of the above 
A)  increase if the demand curve is perfectly inelastic. 
B)  increase if the demand curve is inelastic between E1 and E2. 
C)  decrease if the demand curve is inelastic between E1 and E2. 
D)  decrease if the demand curve is inelastic between E1 and E3. 
E)  none of the above

Question 15

Exhibit 39-8
  
-Refer to Exhibit 39-8.Assume that E1represents the initial equilibrium in the market for grain X.If all the farmers agree to restrict production and abide by the agreement,

Accepted Answer

A)  the price of X increases. 
B)  the equilibrium quantity decreases. 
C)  total revenues increase if the demand curve is inelastic between E1 and E3. 
D)  all of the above 
E)  a and b only 
A)  the price of X increases. 
B)  the equilibrium quantity decreases. 
C)  total revenues increase if the demand curve is inelastic between E1 and E3. 
D)  all of the above 
E)  a and b only

Question 16

Exhibit 39-5
  
-Refer to Exhibit 39-5.Low price elasticity of demand for corn coupled with unpredictable weather makes both price and total revenue in the market for corn extremely volatile.Which of the supply curves would result in the least volatility?

Accepted Answer

A)  S1. 
B)  S2. 
C)  S3. 
D)  The changes are not dependent upon elasticity of supply. 
A)  S1. 
B)  S2. 
C)  S3. 
D)  The changes are not dependent upon elasticity of supply.

Question 17

If the government establishes a price floor for agricultural products,then

Accepted Answer

A)  consumers will pay a lower price for the products. 
B)  consumers will increase the quantity that they are willing to consume. 
C)  farmers will want to decrease their production. 
D)  the government will need to purchase the resulting surplus. 
E)  all of the above 
A)  consumers will pay a lower price for the products. 
B)  consumers will increase the quantity that they are willing to consume. 
C)  farmers will want to decrease their production. 
D)  the government will need to purchase the resulting surplus. 
E)  all of the above

Question 18

Increased productivity in the agricultural sector is not always a benefit to farmers because it is accompanied by

Accepted Answer

A)  lower prices and if demand is inelastic, lower prices mean lower revenues. 
B)  higher prices and if demand is elastic, higher prices mean lower revenues. 
C)  lower prices and if demand is elastic, lower prices mean lower revenues. 
D)  higher prices and if demand is inelastic, higher prices mean lower revenues. 
A)  lower prices and if demand is inelastic, lower prices mean lower revenues. 
B)  higher prices and if demand is elastic, higher prices mean lower revenues. 
C)  lower prices and if demand is elastic, lower prices mean lower revenues. 
D)  higher prices and if demand is inelastic, higher prices mean lower revenues.

Question 19

A government agricultural policy in which a mandated minimum price is set is the

Accepted Answer

A)  marketing quota system. 
B)  acreage allotment program. 
C)  price support program. 
D)  target price system. 
E)  paying farmers not to produce system. 
A)  marketing quota system. 
B)  acreage allotment program. 
C)  price support program. 
D)  target price system. 
E)  paying farmers not to produce system.

Question 20

Supply-restricting policies are intended to shift the

Accepted Answer

A)  supply curve to the left. 
B)  supply curve to the right. 
C)  demand curve to the left. 
D)  demand curve to the right. 
E)  b and d 
A)  supply curve to the left. 
B)  supply curve to the right. 
C)  demand curve to the left. 
D)  demand curve to the right. 
E)  b and d

Exam 39: Agriculture: Problems, Policies, and Unintended Effects

Stating that income elasticity of demand for potatoes equals 0.15 is equivalent to stating that if income

Exhibit 39-4 -Refer to Exhibit 39-4.At a target price of $4 per bushel,what price does the consumer pay?

The major way that the government supports crop prices is by granting nonrecourse loans to farmers.

A farmer has 500 acres on which he has previously grown corn.His yield per acre is 100 bushels of corn.If his production flexibility contract payment is $21,250,then what is the corn payment rate?

Which of the following statements is true?

Exhibit 39-4 -Refer to Exhibit 39-4.The price elasticity of demand for wheat between the prices of $3 and $4 is

In 2000,farmers in the United States represented approximately what percentage of the population?

Exhibit 39-7 -Refer to Exhibit 39-7.Let E1 represent the initial equilibrium in the market for X.Population growth combined with the widely publicized results of medical research extolling the virtues of consuming X will,ceteris paribus,result in a new equilibrium at

One unintended consequence of the various attempts to restrict farm acreage was that

The price of a foodstuff falls and the total revenue (received by farmers for selling the foodstuff)rises.What could explain this?

Exhibit 39-2 -Refer to Exhibit 39-2.Given a target price of P?,what is the total deficiency payment made by the government?

Demand for a food item increases by more than the supply of the food item.One thing for certain is that

Suppose iceberg lettuce has an income elasticity of demand of 0.35.A 10 percent increase in income causes the quantity demanded of iceberg lettuce to _______________ by ______________ percent.

Exhibit 39-8 -Refer to Exhibit 39-8.Assume that E1 represents the initial equilibrium in the market for grain X.As a result of increased agricultural productivity,total revenues for farmers in this market will

Exhibit 39-8 -Refer to Exhibit 39-8.Assume that E1represents the initial equilibrium in the market for grain X.If all the farmers agree to restrict production and abide by the agreement,

Exhibit 39-5 -Refer to Exhibit 39-5.Low price elasticity of demand for corn coupled with unpredictable weather makes both price and total revenue in the market for corn extremely volatile.Which of the supply curves would result in the least volatility?

If the government establishes a price floor for agricultural products,then

Increased productivity in the agricultural sector is not always a benefit to farmers because it is accompanied by

A government agricultural policy in which a mandated minimum price is set is the

Supply-restricting policies are intended to shift the

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Exhibit 39-7 -Refer to Exhibit 39-7.Let E₁ represent the initial equilibrium in the market for X.Population growth combined with the widely publicized results of medical research extolling the virtues of consuming X will,ceteris paribus,result in a new equilibrium at

Suppose iceberg lettuce has an income elasticity of demand of 0.35.A 10 percent increase in income causes the quantity demanded of iceberg lettuce to _ by percent.

Exhibit 39-8 -Refer to Exhibit 39-8.Assume that E₁ represents the initial equilibrium in the market for grain X.As a result of increased agricultural productivity,total revenues for farmers in this market will

Exhibit 39-8 -Refer to Exhibit 39-8.Assume that E₁represents the initial equilibrium in the market for grain X.If all the farmers agree to restrict production and abide by the agreement,