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Chapter 15 Test Bank Key
1. How much will farm subsidies cost taxpayers between 2002 and 2012?
A. $15-$20 billion per year.
2. If an agricultural market is perfectly competitive, then
A. A farmer is a price taker.
3. In the United States, in general, farmers behave like
A. Monopolists.
4. Which of the following is true for the agriculture market?
5. Farmers cannot individually affect market price because
6. Which of the following characterizes a competitive agricultural market?
7. Which of the following characterizes a typical agricultural market?
8. If an individual farmer in a perfectly competitive agricultural market raises her price above the market price, the
farmer will
A. Not sell any product.
9. Which of the following is true for a perfectly competitive agricultural market with economic profits?
A. Firms will enter and existing firms will increase their production until economic profits are zero.
10. In a perfectly competitive farm market with economic losses, farmers will
A. Buy more farmland and expand until profits are normal.
11. The exit of farms from a market should
12. If an agricultural market is perfectly competitive, which of the following types of behavior might be expected?
13. Which of the following is consistent with farming as a competitive market?
14. Individual farmers maximize profit by producing the level of output at which
15. In order to continue earning an economic profit, individual farmers must
A. Expand their rate of output until marginal cost equals zero.
16. Compared to the early 1950s, today farm output per labor-hour is
17. The typically price-inelastic demand for agricultural products can be explained by
18. Because farm products have a low elasticity of demand, a small change in output will have
19. The price elasticity of demand for food is
20. Ceteris paribus, if the corn crop is 15 percent larger this year than it was last year, farmers will have to
________ the price of corn by ________ to sell the new
21. If the price elasticity of demand for food is low, an increase in supply due to an improvement in technology
will result in a ______ price and _______ in total revenue.
22. Given the typical price elasticity of demand for food, a poor harvest should, ceteris paribus, lead to
23. A bumper crop of apples can lead to sharply lower market prices and a decline in earned farm income
24. The price elasticity of demand for soybeans is defined as the
25. Suppose a bumper wheat crop results in a 40 percent increase in output and sales, while the price elasticity of
demand for wheat is about 0.8. Ceteris paribus, prices should
26. If the price of corn falls by 25 percent on world markets, causing American corn consumption to increase by 10
percent, ceteris paribus, the price elasticity of demand for corn in the United States would be
27. Because the income elasticity of food demand is low, we expect an increase in income to result
28. Given the typical income elasticity for food, a 10 percent increase in income will lead to
29. Suppose European incomes increase by 4 percent per year, and as a result, U.S. exports of farm goods to
Europe rise by less than 4 percent annually. The elasticity that can be computed from this information is the
30. Suppose European incomes increase by 4 percent per year, and as a result, U.S. exports of farm goods
to Europe rise by 1 percent per year. The income elasticity that can be computed from this information is
31. Suppose European incomes increase annually by 4 percent per year, and as a result, U.S. farm exports
to Europe rise by 2 percent annually. The U.S. farm exports are
A. Inferior goods.
32. Agricultural prices
33. From the early 1900s to 2009, the ratio of farm prices to nonfarm prices
A. Decreased 60 percent.
34. Prices of farm products are
35. Response lags
A. Reduce short-term price instability.
36. Wide price swings in farm products are the result of
37. Short-term price swings for farm products are partially the result of
A. Producers acting collectively to bid up prices.
38. Time lags between the production decision and the resultant harvest contribute to
39. Which of the following helped to maintain a healthy farm sector prior to 1920?
40. During the period from 1910 to 1919, demand for U.S. farm goods
41. The biggest plunge in farm prices occurred
42. Farm price support programs most often take the form of price
43. The primary focus of U.S. farm policy has been
44. Farm price support programs most often take the form of
45. If the support price is set below the equilibrium market price,
A. A surplus will result.
46. If a price support is maintained above the equilibrium price, the result will be a
47. If an agricultural price support keeps a price above the equilibrium market price,
48. The impact of price supports is to
49. Which of the following would result from a price support program when the support price is set above the
equilibrium price, ceteris paribus?
A. Output would decline.
50. An effective price floor
A. Results in a surplus.
51. The relationship between farm and nonfarm prices that existed during the period from 1910 to 1914 is
known as
52. Parity pricing refers to the relative price of farm products to nonfarm products in the period
A. 1930
53. The Agricultural Adjustment Act of 1933 was based on the belief that farm incomes would improve if
54. Supply restrictions in the farming industry occur in all of the following forms except
A. Acreage set-asides.
55. Supply restrictions in the farming industry occur in the form
56. Supply restrictions in the farming industry occur in the form of
57. All of the following government actions result in supply restriction except
quotas.
58. An advantage of set-aside programs over price support programs is that they
A. Reduce the price of agricultural goods.
59. Which of the following agricultural programs reduces agricultural output rather than increasing it?
60. Which program forces farmers to destroy millions of dollars'worth of crops each year?
A. Marketing orders.
61. The market surplus induced by price supports can be eliminated through all of the following except
A. Government purchases.
62. Which of the following government actions will decrease surplus food supplies?
A. An increase in the loan rate.
63.
Refer to Figure 29.1. At a price of P1 in Figure 29.1, there would be a
64.
If the government wished to institute a set-aside program to support the price at P1 rather than P2 in
Figure 29.1, by how much would market output be reduced?
65. Which of the following can be used to eliminate agricultural shortages?
66. The government inflates the demand for farm products
67. The loan rate is the
A. Interest rate farmers pay banks for loans.
68. The implicit price paid by the government for surplus crops taken as collateral for loans to farmers is called
69. In 2014-2015 how much could a wheat farmer borrow for every bushel of wheat relinquished to the
Commodity Credit Corporation (CCC)?
70. Prior to 2001, if the market price of cotton was below the government's loan rate,
71. If a farmer sells a crop and uses some of the proceeds to repay the Commodity Credit Corporation (CCC),
the market price is
72. The 2001 amendment to the Commodity Credit Corporation (CCC) loan program tends to
A. Reduce upward price swings.
73. Irrigation water delivered by federally funded reclamation projects is classified as
A. A farm cost subsidy.
74.
Refer to Figure 29.2 for Farmer Sanchez with a price floor set above the market price. Assume the
price support is located at the minimum point on the farmer's ATC curve. If this support is eliminated,
Farmer Sanchez may do all of the following except
75.
Refer to Figure 29.2 for Farmer Smith with a price floor set above the market price. Assume the price support
is located at the minimum point on the farmer's ATC curve. If this support is eliminated, all of the following will
result except
