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Chapter 22 Agriculture: Economics and Policy Answer Key
Multiple Choice Questions
1.
The demand for agricultural products is
A.
relatively elastic with respect to price.
2.
The demand for agricultural products
D.
has been rising more rapidly than the national income.
3.
Which of the following statements best describes the demand for agricultural
commodities?
A.
It takes a small decline in price to induce a large increase in the amount of agricultural
products demanded.
22-2
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
Di f ficulty : 02 Medium
Learning Objective: 22-01 Explain why agricultural prices and farm income are unstable.
Test Bank: I
Topic: Economics of Agriculture
4.
The demand for most agricultural products is
A.
elastic with respect to price but inelastic with respect to income.
5.
The demand for agricultural products rises less rapidly than income. This means that the
demand for agricultural products is
D.
price elastic.
6.
In the United States, "farm products" are generally produced in more markets, while "food
products" tend to be sold in markets that are more .
A.
monopolistic; competitive
22-3
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
Blooms: Understand
Di f ficulty : 02 Medium
Learning Objective: 22-01 Explain why agricultural prices and farm income are unstable.
Test Bank: I
Topic: Economics of Agriculture
7.
Farm share of U.S. GDP has
A.
declined from about 12 percent in 1950 to 1 percent today.
8.
What percentage of their spending do U.S. consumers allocate to food purchases?
A.
1 percent.
9.
Which of the following best describes the short-run problem faced by farms?
A.
New technology has increased the productivity of farmers and therefore resulted in
declining farm prices and low farm incomes.
22-4
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
of farm goods, has caused small year-to-year fluctuations in farm output to result in highly
unstable farm
incomes.
C.
The supply of farm products has increased relative to the demand for them, and because
demand is inelastic, prices of farm output and farm income have therefore declined.
D.
The demand for farm products has increased relative to their supply, but the elastic nature
of agricultural demand has caused these shifts to result in declining farm incomes.
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
Blooms: Understand
Di f ficulty : 02 Medium
Learning Objective: 22-01 Explain why agricultural prices and farm income are unstable.
Test Bank: I
Topic: Economics of Agriculture
10.
Since 1950, U.S. farm exports have
D.
averaged about 50 percent of U.S. farm output.
11.
Which of the following would, other things equal, reduce the demand for U.S. farm
products?
A.
poorer crops abroad
Topic: Economics of Agriculture
12.
Which of the following would, other things equal, increase the demand for U.S. farm
products?
D.
increases in foreign tariffs on imported farm products
13.
Refer to the diagram. If farmers produce a normal crop of Qn, their gross income
A. will be 0PpPNQn.
22-6
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D.
cannot be determined.
AACSB: Knowledge Application
Blooms: Understand
Di f ficulty : 02 Medium
Learning Objective: 22-01 Explain why agricultural prices and farm income are unstable.
Test Bank: I
Topic: Economics of Agriculture
Type: Graph
14.
Refer to the diagram. If farmers produce a bumper crop of Qb, their gross income
A. will be 0PpPBQb.
Type: Graph
15.
Refer to the diagram. If output changes from a poor crop, Qp, to a bumper crop, Qb,
D.
farm incomes may either rise or fall.
16.
If the demand for an agricultural product is inelastic, a bumper crop will
A.
raise price and decrease total revenues.
22-8
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
Blooms: Understand
Di f ficulty : 02 Medium
Learning Objective: 22-01 Explain why agricultural prices and farm income are unstable.
Test Bank: I
Topic: Economics of Agriculture
17.
Which of the following statements is correct?
A.
The price support program hastened the exodus of resources from agriculture.
18.
Which diagram best represents the problem faced by farms in the short run?
A. A
19.
Which diagram best represents the problem faced by farms in the long run?
D.
D
20.
A bumper crop of farm products causes
A.
only a slight decline in the price of farm products because the demand for farm products
is income inelastic.
22-11
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
price inelastic.
C.
only a slight decline in the price of farm products because the demand for farm products
is income elastic.
D.
a large decline in the price of farm products because the demand for farm products is
price elastic.
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
Blooms: Understand
Di f ficulty : 02 Medium
Learning Objective: 22-01 Explain why agricultural prices and farm income are unstable.
Test Bank: I
Topic: Economics of Agriculture
21.
An extraordinarily small crop of farm products due to drought causes
is income inelastic.
D.
a large increase in the price of farm products because the demand for farm products is
price elastic.
22.
Which of the following best describes the main problem faced by farms in the long run?
A.
Lagging technology has decreased the productivity of farmers and therefore resulted in
low farm prices and incomes.
22-12
23.
Since 1950, farm productivity has
D.
doubled.
24.
Over time, technological change has
A.
reduced both the price elasticity and income elasticity of the demand for farm products.
25.
Which of the following statements about U.S. agriculture is true as it relates to the past
several decades?
A.
The demand for farm products has declined, the supply of farm products has increased,
and the price of farm products has declined.
26.
Which of the diagrams best describes the long-run path of real (inflation-adjusted) farm
prices?
22-14
written consent of McGraw-Hill Education.
A. A
27.
One consequence of the long-run problem faced by farms has been a
A.
rapid increase in the price of farm output.
28.
Refer to the diagram. Which of the following supply and demand shifts portray the long-run
problem that farms face?
A. S to S' and D to D'
29.
The problem faced by farms in the long run as portrayed in the diagram would involve price
and quantity changes from
D.
P4 to P1 and Q4 to Q1.
30.
The growing importance of export demand for American agriculture has
A.
reduced the international value of the dollar.
22-17
31.
Which of the following is not characteristic of U.S. agriculture?
D.
Demand is inelastic with respect to price.
32.
Which of the following is correct?
A.
The rapid expansion of foreign incomes will reduce U.S. agricultural exports.
33.
In 2015, farm employment constituted about
A.
15.8 percent of total employment.
34.
Measured in terms of farm employment and the number of farms, agriculture has been
D.
a volatile industry.
35.
Over the past several decades, farm employment has
A.
grown absolutely but declined as a percentage of total employment.
22-19
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 22-02 Discuss why there has been a huge employment exodus from
agriculture to other U.S. industries over the past several decades.
Test Bank: I
Topic: The Long Run: A Declining Industry
36.
Which of the following countries has the smallest percentage of its labor force employed
in agriculture?
A.
Madagascar
37.
Which of the following arguments is not generally made to justify farm subsidies?
A.
The "family farm" is an American institution that should be protected and nurtured.
38.
Which of the following arguments for farm subsidies is most closely associated with the
parity concept?
22-20
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written consent of McGraw-Hill Education.
declining in real terms and should therefore receive price and income support.
B.
Farmers sell their output in purely competitive markets but must buy inputs from
imperfectly competitive firms.
C.
Farmers cannot fully insure themselves against the risks unusual to farming, such as
floods, droughts, and pests.
D.
The "family farm" is an American institution that should be protected and nurtured.
39.
Historically, many aspects of U.S. farm policies had their origins in the
A.
Agricultural Extension Service Act.
40.
Which of the following statements best describes the parity concept?
A.
The prices of farm commodities should vary inversely with changes in the prices-paid
index for farmers.
