Question 1

Explain how nonrecourse loans operate and how they help to support crop prices.

Accepted Answer

A nonrecourse loan is the major way the government supports crop prices.To get a nonrecourse loan,a farmer must pledge a quantity of a given commodity.The amount of the loan is equal to the given quantity of the commodity multiplied by a designated rate per unit called the loan rate.The farmer can either repay the loan amount with interest,or keep the loan and forfeit the pledged commodity.The option chosen by the farmer depends on the market price of the commodity relative to the loan rate.If the market price is higher than the loan rate,then the farmer will be better off to pay back the loan and sell the commodity at the market price.On the other hand,if the loan rate is higher than the market price the farmer would be better off to keep the loan and forfeit the commodity.In this way,the farmer has been guaranteed a price that is equivalent to the loan rate.

Question 2

Increased productivity in the agricultural sector during much of the twentieth century shifted the

Accepted Answer

A) demand curve for farm products rightward. 
B) supply curve of farm products leftward. 
C) demand curve for farm products leftward. 
D) supply curve of farm products rightward. 
A) demand curve for farm products rightward. 
B) supply curve of farm products leftward. 
C) demand curve for farm products leftward. 
D) supply curve of farm products rightward. D

Question 3

Agricultural price supports refer to

Accepted Answer

A) minimum prices set by the government on certain farm products. 
B) maximum prices set by the government on certain farm products. 
C) supply-restricting policies imposed by the government on certain farm products. 
D) b and c 
E) none of the above 
A) minimum prices set by the government on certain farm products. 
B) maximum prices set by the government on certain farm products. 
C) supply-restricting policies imposed by the government on certain farm products. 
D) b and c 
E) none of the above A

Question 4

Suppose farmers get together and decide to be less productive.They want to do this so that they can shift the supply curve of farm products leftward and raise the price.What are the thoughts of a profit-maximizing farmer most likely to be once this agreement has been made?

Accepted Answer

A) If I break the agreement while everyone else holds to it,I can make myself better off. 
B) I am happy that we decided to be unproductive;I can't be unproductive by myself. 
C) I will definitely hold to the agreement. 
D) Everyone will break the agreement but me. 
A) If I break the agreement while everyone else holds to it,I can make myself better off. 
B) I am happy that we decided to be unproductive;I can't be unproductive by myself. 
C) I will definitely hold to the agreement. 
D) Everyone will break the agreement but me.

Question 5

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

Accepted Answer

A) the price of the food item rises. 
B) income elasticity of demand is less than 0. 
C) the supply curve is price inelastic. 
D) real income falls as a result. 
E) none of the above 
A) the price of the food item rises. 
B) income elasticity of demand is less than 0. 
C) the supply curve is price inelastic. 
D) real income falls as a result. 
E) none of the above

Question 6

If the demand for a particular agricultural product is highly elastic and bad weather causes the supply to decrease,then we would expect the price of agricultural products to

Accepted Answer

A) decrease and farmers' revenues to decrease. 
B) increase and the demand to decrease. 
C) increase while farmers' revenues decrease significantly. 
D) increase by a large percentage while farmers' revenues decrease only slightly. 
A) decrease and farmers' revenues to decrease. 
B) increase and the demand to decrease. 
C) increase while farmers' revenues decrease significantly. 
D) increase by a large percentage while farmers' revenues decrease only slightly.

Question 7

Exhibit 39-8  
-Refer to Exhibit 39-8.Assume that E1 represents 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 8

Explain how the combination of major changes in the weather and price inelasticity of demand for a food item can lead to wide fluctuations in a farmer's income from year to year.

Accepted Answer

Major changes in the weather can impact

Question 9

Studies shows that income elasticity of demand for food is

Accepted Answer

A) less than 1,but greater than 0. 
B) more than 1,but less than 2. 
C) less than 0. 
D) more than 2. 
A) less than 1,but greater than 0. 
B) more than 1,but less than 2. 
C) less than 0. 
D) more than 2.

Question 10

Under a target price system,the government can adjust the deficiency payment paid to a farmer by deciding to pay some percentage of the difference between the target price and the market price.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Which of the following increases the quantity supplied of agricultural goods?

Accepted Answer

A) acreage allotments 
B) assigning market quotas 
C) agricultural price supports 
D) a,b,and c 
A) acreage allotments 
B) assigning market quotas 
C) agricultural price supports 
D) a,b,and c

Question 13

A potato farmer who signs a futures contract is

Accepted Answer

A) speculating on the future price of potatoes,hoping it will be higher. 
B) speculating on the future price of potatoes,hoping it will be lower. 
C) eliminating his exposure to risk from a falling potato price. 
D) trying to influence the price of potatoes to rise. 
A) speculating on the future price of potatoes,hoping it will be higher. 
B) speculating on the future price of potatoes,hoping it will be lower. 
C) eliminating his exposure to risk from a falling potato price. 
D) trying to influence the price of potatoes to rise.

Question 14

Which of the following statements is true?

Accepted Answer

A) There are more farms today than at the beginning of the 20th century. 
B) An individual farmer prefers good weather to bad weather,but farmers as a group may prefer bad weather to good weather,especially if the demand for their products is inelastic. 
C) Income elasticity of demand measures the responsiveness of a change in quantity supplied to changes in income. 
D) a and b 
E) b and c 
A) There are more farms today than at the beginning of the 20th century. 
B) An individual farmer prefers good weather to bad weather,but farmers as a group may prefer bad weather to good weather,especially if the demand for their products is inelastic. 
C) Income elasticity of demand measures the responsiveness of a change in quantity supplied to changes in income. 
D) a and b 
E) b and c

Question 15

The change in the price of a foodstuff will be greater,

Accepted Answer

A) the smaller the change in the supply of the foodstuff. 
B) the greater the change in the supply of the foodstuff and the more inelastic the demand curve for the foodstuff. 
C) the lesser the change in the supply of the foodstuff and the more inelastic the demand curve for the foodstuff. 
D) the greater the change in the supply of the foodstuff and the more elastic the demand curve for the foodstuff. 
E) the lesser the change in the supply of the foodstuff and the more elastic the demand curve for the foodstuff. 
A) the smaller the change in the supply of the foodstuff. 
B) the greater the change in the supply of the foodstuff and the more inelastic the demand curve for the foodstuff. 
C) the lesser the change in the supply of the foodstuff and the more inelastic the demand curve for the foodstuff. 
D) the greater the change in the supply of the foodstuff and the more elastic the demand curve for the foodstuff. 
E) the lesser the change in the supply of the foodstuff and the more elastic the demand curve for the foodstuff.

Question 16

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 17

Exhibit 39-2  
-Refer to Exhibit 39-2.If P1 is a price support,the cost of the price support program to the government is

Accepted Answer

A) P1 x Q2. 
B) P1 x (Q2 - Q0). 
C) P1 x (Q0 - Q1). 
D) P1 x (Q2 - Q1). 
E) none of the above 
A) P1 x Q2. 
B) P1 x (Q2 - Q0). 
C) P1 x (Q0 - Q1). 
D) P1 x (Q2 - Q1). 
E) none of the above

Question 18

Assuming the demand for their products is inelastic,farmers (as a group)have an incentive to

Accepted Answer

A) increase the supply of what they sell. 
B) agree among themselves to decrease the supply of what they sell. 
C) spend at least 10 percent of their budgets to advertise their products. 
D) b and c 
E) a and c 
A) increase the supply of what they sell. 
B) agree among themselves to decrease the supply of what they sell. 
C) spend at least 10 percent of their budgets to advertise their products. 
D) b and c 
E) a and c

Question 19

If real income rises in the economy and,at the same time,productivity in the agriculture sector rises,too,then it follows that the demand for food will

Accepted Answer

A) rise (assuming that income elasticity of demand for food is greater than 1)and the supply of food will remain constant. 
B) rise (assuming that income elasticity of demand for food is greater than 0)and the supply of food will increase,too. 
C) fall (assuming that income elasticity of demand for food is greater than 1)and the supply of food will fall,too. 
D) fall (assuming that income elasticity of demand for food is equal to 1)and the supply of food will rise. 
E) none of the above 
A) rise (assuming that income elasticity of demand for food is greater than 1)and the supply of food will remain constant. 
B) rise (assuming that income elasticity of demand for food is greater than 0)and the supply of food will increase,too. 
C) fall (assuming that income elasticity of demand for food is greater than 1)and the supply of food will fall,too. 
D) fall (assuming that income elasticity of demand for food is equal to 1)and the supply of food will rise. 
E) none of the above

Question 20

Agriculture productivity has increased more rapidly in the U.S.than has nonagriculture productivity.

Accepted Answer

A) True 
 B)False

Exam 26: Stocks, bonds, futures, and Options

Explain how nonrecourse loans operate and how they help to support crop prices.

Increased productivity in the agricultural sector during much of the twentieth century shifted the

Agricultural price supports refer to

Suppose farmers get together and decide to be less productive.They want to do this so that they can shift the supply curve of farm products leftward and raise the price.What are the thoughts of a profit-maximizing farmer most likely to be once this agreement has been made?

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

If the demand for a particular agricultural product is highly elastic and bad weather causes the supply to decrease,then we would expect the price of agricultural products to

Exhibit 39-8 -Refer to Exhibit 39-8.Assume that E1 represents the initial equilibrium in the market for grain X.If all the farmers agree to restrict production and abide by the agreement,

Explain how the combination of major changes in the weather and price inelasticity of demand for a food item can lead to wide fluctuations in a farmer's income from year to year.

Studies shows that income elasticity of demand for food is

Under a target price system,the government can adjust the deficiency payment paid to a farmer by deciding to pay some percentage of the difference between the target price and the market price.

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

Which of the following increases the quantity supplied of agricultural goods?

A potato farmer who signs a futures contract is

Which of the following statements is true?

The change in the price of a foodstuff will be greater,

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

Exhibit 39-2 -Refer to Exhibit 39-2.If P1 is a price support,the cost of the price support program to the government is

Assuming the demand for their products is inelastic,farmers (as a group)have an incentive to

If real income rises in the economy and,at the same time,productivity in the agriculture sector rises,too,then it follows that the demand for food will

Agriculture productivity has increased more rapidly in the U.S.than has nonagriculture productivity.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, part I: Prices and Unemployment

Macroeconomic Measurements, part II: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self-Regulating Economy

Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money,banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, technology, ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case for and Against Government: Five Topics Considered

Filters

Exhibit 39-8 -Refer to Exhibit 39-8.Assume that E₁ represents the initial equilibrium in the market for grain X.If all the farmers agree to restrict production and abide by the agreement,

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

Exhibit 39-2 -Refer to Exhibit 39-2.If P₁ is a price support,the cost of the price support program to the government is