76.
Refer to Figure 29.3 for a cotton market with an equilibrium price of P1 and a Commodity Credit
Corporation (CCC) loan rate set above P1. Given this situation, cotton farmers are most likely to
77.
Refer to Figure 29.3 for a cotton market with an equilibrium price of P1 and a Commodity Credit
Corporation (CCC) loan rate set above P1. If the CCC loan rate is increased, the
78. Government subsidies on the purchase of fertilizer by farmers result in
79. Which of the following items have been subsidized by the U.S. federal government for farmers?
A. Insurance but not drainage.
80. According to the text, which of the following items has the U.S. federal government subsidized for farmers?
81. The advantage of direct income supports is that they
A. Provide income security without distorting market prices and output.
82. Which of the following is not an advantage of direct income support to farmers?
A. Farm incomes increase without market surpluses.
83. A program of countercyclical payments is best classified as a federal
A. Price support program.
84. The principal form of direct farm income support is
85. Farming profits are affected by all of the following costs except
86. Farming profits fell between 1979 and 1983 because of all of the following except
87. When interest rates rise, farm profits
A. Increase because the value of farm assets varies directly with interest rates.
88. When interest rates rise, the debt burden for farmers
89. When interest rates rise, potential income for farmers ________ and their future income becomes _______.
A. falls; more valuable
90. When interest rates fall, land values
A. Increase because the profitability of land is inversely related to interest rates.
91. Ceteris paribus, a weaker U.S. dollar does all of the following except
A. Raise costs of importing agricultural products from abroad to the United States.
92. An increase in the value of the U.S. dollar internationally, ceteris paribus, would result in
93. Fertilizer prices tend to
94.
Select the letter of the diagram in Figure 28.1 that best represents the effect of each event on the United States
wheat market, ceteris paribus: A bumper wheat crop in the midwest. (See Figure 29.4.)
95.
Select the letter of the diagram in Figure 28.1 that best represents the effect of each event on the United
States wheat market, ceteris paribus: Transport costs for farm products increase. (See Figure 29.4.)
96.
Select the letter of the diagram in Figure 28.1 that best represents the effect of each event on the United States
wheat market, ceteris paribus: Relaxed immigration laws lead to lower labor costs. (See Figure 29.4.)
97.
Select the letter of the diagram in Figure 28.1 that best represents the effect of each event on the United States
wheat market, ceteris paribus: The federal government decides to no longer purchase wheat from farmers.
(See Figure 29.4.)
98.
Select the letter of the diagram in Figure 28.1 that best represents the effect of each event on the United States
wheat market, ceteris paribus: The dollar increases in value in the foreign exchange markets. (See Figure
29.4.)
99.
Select the letter of the diagram in Figure 28.1 that best represents the effect of each event on the United States
wheat market, ceteris paribus: The federal government restricts the amount of agricultural products that can be
imported. (See Figure 29.4.)
100.
Select the letter of the diagram in Figure 28.1 that best represents the effect of each event on the United States
wheat market, ceteris paribus: The European Union tightens restrictions on the agricultural products that can
be imported from the United States. (See Figure 29.4.)
101. The Farm Security Act of 1985
102. The 1990 Farm Act
103. The 1990 Farm Act resulted in all of the following except
A. A reduction in the target prices for farm products.
104. The 1996 Freedom to Farm Act
105. The 1996 Freedom to Farm Act did all of the following except
106. The intent of the 1996 Freedom to Farm Act was to accomplish all of the following except
107. The “Asian crisis” was responsible for all of the following effects on U.S. agriculture beginning in 1998
except
A. Decreasing farm exports to Asia.
108. The principal cause of a third farm depression beginning in 1997
was A. A crop failure in 1998.
109. To help farmers rebound from the Asian crisis, Congress did all of the following except
A. Approve a new form of aid called “disaster payments.”
110. In 2001 the U.S. Congress did all of the following except
111. The 2007 Farm Act was set to expire in 2012 for all of the following reasons except
112.
One World View article titled “EU Farm Subsidies” reports about the European Union, “… the subsidy for every
cow is greater than the personal income of half the people in the world.” Which of the following programs is
involved?
In 2000, direct EU farm subsidies exceeded $45 billion, triple the size of U.S. farm subsidies. All this protection
costs the average EU consumer over $200 a year.
113.
One World View article titled “EU Farm Subsidies” reports, “… France, Germany, and Switzerland all shield
their farmers from international competition while subsidizing their exports.” Which of the following shifts for
agricultural products in international markets shows the effect of export subsidies?
114. According to “Corn Acres Expected to Soar in 2007; USDA Says Ethanol, Export Demand Lead to Largest
Planted Area in 63 Years,” all of the following occurred in response to the high demand for corn for the use in
ethanol in 2006 except
115. Because there are 2 million farms in the United States, individual farmers have some market power.
116. Agriculture industries are notorious for having barriers to entry.
117. Individual farmers behave like perfect competitors but are still able to earn economic profits in the long run.
118. The farming industry experiences high barriers to entry because of the large amounts of acreage
and expensive equipment that are needed.
119. Since 1929, there have been very few advances in farming technology.
120. The demand for food is price-inelastic.
121. If the price elasticity of demand for farm products is low, abrupt changes in farm output will have a limited effect
on prices.
FALSE
122. Changes in weather cause abrupt shifts in the food supply curve that result in price fluctuations.
123. Given a change in food prices, farmers are typically able to respond rapidly with a change in output.
124. Bumper crops generally reduce farm incomes.
125. The major problems confronting U.S. agriculture are the downward trend in relative farm prices and
abrupt short-term swings in prices.
126. During the early 1900s, U.S. farm goods were heavily subsidized by the government.
127. Demand for U.S. farm products was high during World War I.
128. Over the past century, there has been little variation in the price of corn from one harvest to the next.
129. Farm support programs most often take the form of price floors, which cause excess demand.
130. Acreage set-asides shift the food supply curve to the right and decrease farm prices.
131. The Commodity Credit Corporation is a buyer of last resort for selected farm products.
132. The loan rate is a low-interest rate at which farmers may borrow from the federal government on a short–
term basis.
133. Whenever the market price for crops is below the Commodity Credit Corporation (CCC) loan rate, the
government will end up buying surplus crops.
134. The effect of Commodity Credit Corporation loan programs is to alter the quantity demanded of farm
products as well as to increase the quantity supplied.
135. If parity prices are “fair” they will not cause a market surplus.
136. Today, as a result of government policies, about 25 percent of all farm output is either destroyed or stored.
137. The Department of Agriculture distributes $50-$100 million a year to farmers to help defray the costs
of fertilizer, drainage, and other production costs.
FALSE
138. An increase in fuel prices resulted in higher costs in agriculture during the 1980s.
139. Lower interest rates tend to reduce farm incomes.
140. A weaker value of the U.S. dollar strengthens exports of American agricultural crops.
141. The Farm Security Act of 1985 included a gradual reduction in government support prices.
142. The 1990 Farm Act moved farming closer to the realities of the market system.
143. The 1996 Freedom to Farm Act actually increased the level of government assistance to farmers.
144. In the late 1990s, the Asian crisis reduced the demand for U.S. farm products, which weakened farm prices.
145. Describe the two major problems confronting U.S. agriculture.
146. Explain why abrupt changes in farm output have a magnified effect on market prices.
147. Explain why the ratio of farm prices to nonfarm prices fell 60 percent between 1910–1914 and 2001.
148. Explain why the prices of farm products are subject to abrupt short-term swings.
149. Graphically show how a price floor works and tell how Congress acts to restrict supply to prop up
farm prices.
150. Discuss the benefits and opportunity costs of government farm subsidies.
Chapter 15 Test Bank Summary
Category
# of Questions
AACSB: Analytic
46
AACSB: Reflective Thinking
104
Accessibility: Keyboard Navigation
131
Blooms: Analyze
11
Blooms: Apply
33
Blooms: Evaluate
4
Blooms: Remember
20
Blooms: Understand
82
Difficulty: 01 Easy
20
Difficulty: 02 Medium
85
Difficulty: 03 Hard
45
Learning Objective: 15-01 What makes the farm business different from others.
67
Learning Objective: 15-02 Some mechanisms used to prop up farm prices and incomes.
57
Learning Objective: 15-03 How subsidies affect farm prices; output; and incomes.
26
Topic: DESTABILIZING FORCES
53
Topic: IN THE NEWS
1
Topic: THE ECONOMY TOMORROW
15
Topic: THE FIRST FARM DEPRESSION, 1920-1940
6
Topic: THE SECOND FARM DEPRESSION, 1980-1986
19
Topic: U.S. FARM POLICY
54
Topic: WORLD VIEW
2