22–41
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
85.
(Consider This) In part as a result of the U.S. government‘s ethanol program, between
2005 and 2012 the inflation-adjusted price of a bushel of corn
D.
collapsed to only 5 percent of its pre-2005 level.
86.
(Consider This) Which of the following has been an effect of the U.S. government’s
ethanol program?
A.
Prices for crops such as soybeans and sorghum have fallen dramatically.
87.
(Last Word) The U.S. sugar program
A.
decreases the domestic price of sugar.
22–42
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
requires import quotas or tariffs on foreign sugar.
C.
increases the export earnings of other sugar-producing countries.
D.
aids developing countries that produce sugar.
88.
(Last Word) The U.S. sugar program has
A.
improved the world allocation of agricultural resources.
89.
(Last Word) The U.S. sugar price support program has
D.
increased sugar imports as a percentage of U.S. sugar consumption.
22–43
True / False Questions
90.
U.S. exports of farm products have generally declined as a percentage of U.S. farm
output over the past half-century.
91.
Increases in incomes usually result in more than proportionate increases in the demand
for agricultural products in a growing economy.
92.
Agriculture is overcrowded because of absolute and relative increases in the size of farm
employment.
93.
About 10 percent of the U.S. labor force is in agriculture.
22–44
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
FALSE
94.
Farmers typically sell their products in highly competitive markets and buy in
imperfectly competitive markets.
95.
If the demand for agricultural products is inelastic, a relatively small increase in supply
will cause farm prices and incomes to decline.
96.
The use of price-support programs in agriculture has hastened the exodus of resources
from agriculture.
22–45
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
97.
The concept of parity has provided a rationale for government price supports for farm
products.
98.
If prices received by farmers decline and prices paid by farmers increase, the parity ratio
will decline.
99.
The Food, Conservation, and Energy Act of 2008 provided three types of agricultural
subsidies: direct payments, countercyclical payments, and marketing loans.
22–46
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Difficulty: 01 Easy
Learning Objective: 22–05 List the main elements of existing federal farm policy.
Test Bank: I
Topic: Recent Farm Policies
100.
The Agricultural Act of 2014 expanded the direct payments, countercyclical payments,
and marketing loans provided by the Food, Conservation, and Energy Act of 2008.
101.
Agricultural risk coverage guarantees payments to farmers when the price of their crop
falls below a specific value.
102.
The Agricultural Act of 2014 created two new crop insurance programs, agricultural
risk coverage and price loss coverage.
22–47
103.
The federal government has not paid subsidies to farmers since passage of the Freedom
to Farm Act in 1996.
104.
Environmentalists generally support price supports because these subsidies motivate
additional farm production.
105.
The principal beneficiaries of government agricultural aid have been the very low-
income farmers.
Multiple Choice Questions
106.
The agriculture industry includes both farm commodities and food products. Farm
commodities are usually sold in
A. monopolistically competitive or oligopolistic markets, while food-product markets are
highly competitive.
107.
Approximately what percentage of American consumers‘ total spending is on food?
D.
more than 40 percent
108.
Farm outputs’ share of U.S. GDP from 1950 to the present has
A.
stayed roughly constant at about 10 percent.
22–49
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: II
To pic : Economics of Agriculture
109.
The demand for agricultural products is quite inelastic, and this can be explained by
A.
economies of scale and the substitution effect.
110.
If the prices of agricultural products fall, then the quantities demanded usually
A. do not increase by much because the price-changes are often small.
111.
Suppose the demand for good X, an agricultural product, is price-inelastic. This means
that small variations in the quantity of X produced will be associated with large variations
in the
D.
quantity of good X exchanged.
22–50
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: II
To pic : Economics of Agriculture
112.
With a fixed level of farm production, a given shift in demand for a crop will cause a
A.
small price change if demand is quite inelastic.
113.
It is estimated that the price elasticity coefficient for farm products is 0.2. Therefore, in
order for consumers to increase their purchases of farm products by 10 percent, the prices of
these products
would have to fall
A.
20 percent.
114.
The price elasticity of demand for food tends to be
A. higher in richer nations.
22–51
115.
The inelastic demand for agricultural products means that relatively a small increase in
supply will result in a relatively
D.
large increase in farm prices and a relatively small decrease in total revenue for farmers.
116.
The inelastic demand for agricultural products means that
A.
large changes in agricultural production result in no change in farm prices and incomes.
117.
The relative price inelasticity of demand for agricultural products has resulted in
22–52
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A.
prices fluctuating more in agriculture than in other industries.
B.
prices fluctuating less in agriculture than in other industries.
C.
higher prices for agricultural products.
D.
lower prices for agricultural products.
118.
If the demand curve for wheat is inelastic, then total farm income from wheat will be
D.
lower in years of rising prices.
119.
The inelastic demand for agricultural products means that a(n)
A.
decrease in price will increase farm incomes.
22–53
120.
Refer to the demand graph for a farm product. Which of the following will cause the largest
increase in total revenue for farmers?
A.
a decrease in the price from PA to PC
121.
Refer to the graph. An increase in the price of agricultural products from PB to PA will
A.
increase farm incomes by 0PAAQA.
122.
Refer to the demand graph for a farm product. Which of the following will cause the largest
decrease in farmers’ incomes?
A.
a decrease in quantity from QC to QA
22–55
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: II
To pic : Economics of Agriculture
123.
Refer to the demand graph for a farm product. It suggests that farmers’ revenues or incomes
tend to
124.
The short-run instability in the prices of agricultural products arises from the following
factors, except
A.
inelastic demand for the products.
22–56
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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: II
To pic : Economics of Agriculture
125.
What is the reason why large, short-run declines in farm prices do not significantly
reduce farm production in the short run?
A. Farmers’ variable costs are high compared with their fixed costs.
126.
When fixed costs are high relative to variable costs, producers will tend to
D.
produce in the short run even if the product price is lower than their average fixed costs.
127.
Fixed costs faced by farmers typically include the following, except
A. family labor.
22–57
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D.
interest and rent payments.
128.
Which of the following statements about U.S. farm exports as a percentage of farm
output is false?
A.
It has been on an upward general trend since 1950.
129.
One reason for the year-to-year instability of agricultural product demand is the
A.
high price-elasticity for agricultural products.
130.
Incomes of U.S. farmers are adversely affected by
22–58
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
economic expansion abroad.
C.
less protectionist farm policies abroad.
D.
higher prices of farm products.
131.
Incomes of U.S. farmers tend to be boosted by
A.
very good harvests on farms abroad.
132.
When increases in the supply of an agricultural product are much greater than the
increases in demand for it over time, then the price
A.
and quantity of agricultural products will increase.
133.
Which statement best characterizes the long-run decline in the agricultural industry?
22–59
A. The growth in the demand for farm products has exceeded the growth in the supply of
such products, causing rising farm product prices and falling farm income.
134.
The increase in the productivity of U.S. farmers has caused
A.
more people to be attracted to farming.
135.
The amount of capital used per farmworker increased by how much from 1930 to
1980?
A.
double
22–60
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Understand
Di f ficulty : 02 Medium
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: II
To pic : The Long Run: A Declining Industry
136.
Because the demand for food is relatively price inelastic, what effects would you
expect to see as a result of technological advances that reduce the cost of food production?
A.
Food prices would rise, but farm incomes would decline.
137.
The U.S. Department of Agriculture‘s productivity index in terms of farm output per
unit of farm labor had a value of 10 in 1950. By 2009, the value of the productivity index
was close to
A. 30.
138.
Most of the technological advances in U.S. agriculture are initiated by the following,
except