22–21
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Blooms: Understand
Di f ficulty : 02 Medium
Learning Objective: 22–03 Relate the rationale for farm subsidies and the economics and
politics of price supports price floors.
Test Bank: I
Topic: Economics of Farm Policy
41.
If the prices paid by farmers increase and the prices received by farmers decrease, then
the parity ratio
D.
will be unaffected.
42.
If in a certain year the indices of prices received and paid by farmers were 115 and 142
respectively, the parity ratio (in percentage terms) would be
A. 123.
43.
The parity ratio
A.
compares worker productivity in the farm and nonfarm sectors.
22–22
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written consent of McGraw-Hill Education.
B.
is the ratio of per capita farm income to per capita nonfarm income.
C.
is the ratio of prices received by farmers to prices paid by farmers.
D. is the ratio of prices paid by farmers to prices received by farmers.
44.
Which of the following statements is correct?
A.
The parity ratio has not exceeded 100 in the 20th or 21st century.
45.
If the prices received by farmers increased and the prices paid by farmers also increased,
the parity ratio
A.
will necessarily be unchanged.
22–23
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written consent of McGraw-Hill Education.
Test Bank: I
Topic: Economics of Farm Policy
46.
Refer to the diagram for the corn market. As the result of a supported corn price of B,
D.
a shortage of LG will result.
47.
Refer to the diagram for the corn market. As a consequence of a price support of B,
consumers will
A.
increase their purchases of the product.
48.
Refer to the diagram for the corn market. A price support of B will cause a transfer from
taxpayers to farmers of
A.
0BKL.
49.
Refer to the diagram for the corn market. What effect will a price support of B have on the
gross income of farmers?
A.
Gross income will be unchanged, although profits will rise.
22–27
50.
Refer to the diagram for the corn market. Assuming no externalities, a price support of B
causes
A.
economies of scale.
51.
Which of the following statements is correct?
A.
Price supports may induce either an underallocation or an overallocation of resources to
farm products.
22–28
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written consent of McGraw-Hill Education.
D.
Price supports induce an overallocation of resources to farm products.
52.
The misallocation of resources associated with price supports
D.
is fully offset by reductions in food prices.
53.
Acreage allotment programs were designed to
D.
accelerate the movement of human resources out of farming.
54.
Domestic price supports on, say, sugar
D.
increase the earnings of foreign sugar producers.
55.
Price supports
A.
decrease pollution because participants must practice organic farming.
56.
Because government price supports cause surplus production, government policies have
been designed to
D.
decrease demand and decrease supply of farm products.
22–30
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written consent of McGraw-Hill Education.
Learning Objective: 22–03 Relate the rationale for farm subsidies and the economics and
politics of price supports price floors.
Test Bank: I
Topic: Economics of Farm Policy
57.
The food-stamp program is designed to
A.
increase the supply of farm products.
58.
The Food for Peace program is designed to
A.
achieve 100 percent price parity for all farm products.
59.
Price supports in agriculture have been criticized because they
A.
have hastened the exodus of labor from agriculture.
22–31
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written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
Blooms: Understand
Di f ficulty : 02 Medium
Learning Objective: 22–04 Describe major criticisms of the price-support system in
agriculture.
Test Bank: I
Topic: Criticisms and Politics
60.
When critics of U.S. farm policy say that it treats symptoms rather than causes, they
mean that the
D.
restriction of output in the short run may reduce productive capacity in agriculture in the
long run.
61.
Import quotas on sugar may cost consumers $2 billion per year. But this quota goes
unchallenged because the $10 average annual cost per person is so small that probably not
one voter in 200
knows the quota exists. This statement describes
A.
the voting paradox.
22–32
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written consent of McGraw-Hill Education.
agriculture.
Test Bank: I
Topic: Criticisms and Politics
62.
Farm groups spend considerable amounts of money to maintain and enlarge political
support for farm subsidies. This illustrates
A.
coalitions.
63.
As applied to agriculture, the special-interest effect suggests that
A.
urban legislators support farm legislation in exchange for rural legislators supporting
urban-oriented legislation.
64.
If farm state legislators support the food–stamp program to aid the urban poor and urban
state legislators in turn support farm subsidies, this is an example of
A.
the special-interest effect.
22–33
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written consent of McGraw-Hill Education.
B.
political logrolling.
C.
the paradox of voting.
D.
cost-benefit analysis.
65.
Farm programs such as those of the United States and the European Union
A.
are consistent with free world trade in agricultural products.
66.
Farm programs such as those of the United States and the European Union
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Test Bank: I
Topic: Criticisms and Politics
67.
Farm programs such as those of the United States and the European Union cause a
misallocation of international agricultural resources primarily because
D.
price supports are set below market-clearing levels.
68.
An international agreement reached in 1994 by the world’s trading nations provides for
69.
In 1994, the world‘s trading nations agreed to
A.
increase export subsidies to reduce world surpluses of farm products.
22–35
70.
The purpose of the Freedom to Farm Act of 1996 was to
A.
immediately end U.S. farm subsidies.
71.
The U.S. price-support program, which guaranteed prices for currently grown crops
D.
was restored in full and expanded by the Food, Conservation, and Energy Act of 2008.
72.
The Food, Conservation, and Energy Act of 2008
A.
ended 60 years of U.S. price supports for American grain crops.
22–36
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written consent of McGraw-Hill Education.
Freedom to Farm Act of 1996.
C.
ended the “freedom to plant” approach of the Freedom to Farm Act of 1996 and restored
acreage allotments.
D.
maintained the “freedom to plant” and “direct-payment” features of the Freedom to Farm
Act of 1996, and also provided countercyclical payments and marketing loans to assist
farmers.
73.
The Agricultural Act of 2014
A.
maintained the “freedom to plant” and “direct-payment” features of the Freedom to Farm
Act of 1996, and also provided countercyclical payments and marketing loans to assist
farmers.
74.
The Agricultural Act of 2014
22–37
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AACSB: Knowledge Application
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 22–05 List the main elements of existing federal farm policy.
Test Bank: I
Topic: Recent Farm Policies
75.
Irving Tiller received an insurance payment because his wheat crop sold for a price
below an established threshold. Under the Agricultural Act of 2014, Tiller received payment
under
A.
direct payment coverage.
76.
Which of the following was a feature of farm policy present in the Food, Conservation,
and Energy Act of 2008 that was not part of the Freedom to Farm Act of 1996?
A.
direct payments (direct subsidies) based on crops currently grown
77.
Under the Food, Conservation, and Energy Act of 2008, subsidies to farmers based on
gaps between actual prices of crops and targeted prices were called
22–38
A.
direct payments.
78.
From 2010 to 2012, Johnny Deer exclusively grew corn. Under the Food, Conservation,
and Energy Act of 2008, Deer
A.
was required to grow corn in the next year in order to receive direct payments from the
federal government.
79.
Ward Planter exclusively grew soybeans from 2011 to 2013 and participated in the
marketing loan program of the Food, Conservation, and Energy Act of 2008. If the “crop
price” of soybeans at
harvest was less than the preharvest “loan price,” Planter could
A.
sell his crop in the market and receive the difference between the crop price and loan
price as a direct payment from the federal government.
80.
The Agricultural Act of 2014 does not address the fundamental problem of agricultural
subsidies, which is that those subsidies
A.
reduce work incentive for farmers, thus reducing agricultural production.
81.
In 2015, Farmer Lactose’s dairy farm lost money. Under the Agricultural Act of 2014
dairy margin protection program, which of the following events would have triggered
payments to Farmer
Lactose?
A.
only the price of milk falling too low
82.
In 2015, Farmer Levi grew only soybeans and received payments under the agricultural
risk coverage program of the Agricultural Act of 2014. Which of the following best explains
why Farmer
Levi received these payments?
A.
The price of soybeans fell below a specified threshold.
83.
(Consider This) Which of the following methods is used by farmers to “hedge” against
short-run price and output fluctuations?
A.
securing prices for their output in the futures market
84.
(Consider This) Which of the following methods is commonly used by farmers to
“smooth” income over time?
A.
producing only one crop to benefit from specialization