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LOCAL STANDARDS:
United States - OH - Default City - DISC: The role of government
KEYWORDS:
Bloom's: Comprehension
67. A government agricultural policy that sets a limit on the quantity of a product that a farmer is allowed to bring to
market is the
a.
marketing quota system.
b.
acreage allotment program.
c.
price support program.
d.
target price system.
e.
paying farmers not to produce system.
68. A government agricultural policy in which a guaranteed price is set and no surplus is created is the
a.
marketing quota system.
b.
acreage allotment program.
c.
price support program.
d.
target price system.
69. When the government institutes a target price,
a.
a surplus is created.
b.
consumers must pay the target price.
c.
the farmer receives a deficiency payment if the market price is below the target price.
d.
the farmer receives a deficiency payment if the market price is above the target price.
e.
all of the above
Exhibit 39-3
70. Refer to Exhibit 39-3. If P3 is a price support, the amount sold on private markets is
a.
Q1.
b.
Q2.
c.
Q3.
d.
Q2 - Q3.
e.
Q1 - Q3.
71. Refer to Exhibit 39-3. If P3 is a target price, the quantity supplied is
a.
Q1.
b.
Q2.
c.
Q3.
d.
Q2 - Q3.
e.
Q1 - Q3.
72. Refer to Exhibit 39-3. If P3 is a target price, the price at which output will be purchased is
a.
P1.
b.
P2.
c.
P3.
d.
P3 - P2.
e.
P1 - P2.
73. Refer to Exhibit 39-3. If P3 is a target price, the deficiency payment per unit is
a.
P1.
b.
P2.
c.
P3.
d.
P3 - P1.
e.
P3 - P2.
74. Refer to Exhibit 39-3. If P3 is a target price, the total deficiency payment that government makes to farmers is
a.
P2 x Q3.
b.
P3 x Q3.
c.
(P3 - P1) x Q1.
d.
(P3 - P1) x Q2.
e.
(P3 - P2) x Q3.
Exhibit 39-4
75. Refer to Exhibit 39-4. At the competitive equilibrium price and quantity, the total revenue of wheat farmers will be
a.
$1,400.
b.
$1,800.
c.
$2,400.
d.
$2,800.
e.
$5,000.
76. Refer to Exhibit 39-4. The government feels that the present level of farmers' total revenues is insufficient to support a
reasonable standard of living and wants to raise it to exactly $3,000. This can be achieved by
a.
restricting supply so that price increases to $4.
b.
a price support of $5.
c.
restricting supply so that price increases to $5.
d.
any of the above
e.
none of the above
77. Refer to Exhibit 39-4. The price elasticity of demand for wheat between the prices of $3 and $4 is
a.
equal to 1.
b.
less than 1.
c.
greater than 1.
d.
equal to 100.
e.
c and d
78. Refer to Exhibit 39-4. The price support of $6 per bushel results in private citizens spending __________ on wheat.
a.
$600
b.
$3,000
c.
$3,600
d.
$4,800
e.
$6,600
79. Refer to Exhibit 39-4. The price support of $6 per bushel would cost the government
a.
$600.
b.
$3,000.
c.
$3,600.
d.
$4,800.
e.
$6,600.
80. Refer to Exhibit 39-4. If the government sets a target price at $5 per bushel, the quantity of wheat produced will be
a.
600 bushels.
b.
700 bushels.
c.
800 bushels.
d.
900 bushels.
e.
1,000 bushels.
81. Refer to Exhibit 39-4. If the government sets a target price at $5 per bushel, consumers will end up paying
__________ for the quantity of wheat they purchase.
a.
$1,000
b.
$2,000
c.
$3,000
d.
$4,000
e.
$5,000
82. Refer to Exhibit 39-4. At the government-established support price of $5 per bushel, the wheat surplus that
government buys equals
a.
600 bushels.
b.
400 bushels.
c.
200 bushels.
d.
0 bushels.
83. Refer to Exhibit 39-4. At a target price of $4 per bushel, how many bushels of wheat are produced?
a.
900
b.
800
c.
700
d.
600
84. Refer to Exhibit 39-4. At a target price of $4 per bushel, what price does the consumer pay?
a.
$5
b.
$4
c.
$3
d.
$2
85. Refer to Exhibit 39-4. At a target price of $4 per bushel, how much does the private sector spend on wheat?
a.
$2,400
b.
$1,800
c.
$2,800
d.
$3,600
86. Refer to Exhibit 39-4. Under a price support program of $4 per bushel, how many bushels of surplus wheat does the
government purchase?
a.
0
b.
200
c.
700
d.
900
Exhibit 39-5
87. Refer to Exhibit 39-5. Low price elasticity of demand for corn coupled with unpredictable weather makes both price
and total revenue in the market for corn extremely volatile. Which of the supply curves would result in the least volatility?
a.
S1.
b.
S2.
c.
S3.
d.
The changes are not dependent upon elasticity of supply.
88. Stating that income elasticity of demand for potatoes equals 0.15 is equivalent to stating that if income
a.
decreases by 10 percent, potato purchases decrease by 1.5 percent.
b.
increases by 10 percent, potato purchases increase by 15 percent.
c.
decreases by 1.5 percent, potato purchases decrease by 10 percent.
d.
increases by 15 percent, potato purchases decrease by 10 percent.
e.
none of the above
Exhibit 39-6
89. Refer to Exhibit 39-6. A major change in weather conditions favorable to the production of X will shift the supply
curve for X from its original position. The consequent change in price and total revenue would be less sharp if the demand
curve for X is __________ because it is __________ over the relevant region.
a.
D1; more elastic than D2
b.
D1; more inelastic than D2
c.
D2; more elastic than D1
d.
D2; more inelastic than D1
90. If the government attempts to aid farmers by implementing a policy that results in a leftward shift in the supply curve
of agricultural products, the policy in question is most likely
a.
a price support.
b.
an acreage allotment program.
c.
a target price.
d.
any of the above
Exhibit 39-7
91. Refer to Exhibit 39-7. Let E1 represent the initial equilibrium in the market for X. A combination of population
growth and an increase in agricultural productivity will likely result in a new equilibrium at
a.
E2.
b.
E3.
c.
E4.
d.
E5.
e.
E4 or E5, depending on the extent of income elasticity of demand.
92. Refer to Exhibit 39-7. Let E1 represent the initial equilibrium in the market for X. Population growth combined with
the widely publicized results of medical research extolling the virtues of consuming X will, ceteris paribus, result in a
new equilibrium at
a.
E2.
b.
E3.
c.
E4.
d.
E5.
e.
E4 or E5, depending on the extent of income elasticity of demand.
Exhibit 39-8
93. Refer to Exhibit 39-8. Assume that E1 represents the initial equilibrium in the market for grain X. As a result of a
breakthrough in genetic engineering that develops an insect-resistant variety of grain X,
a.
the supply curve shifts leftward.
b.
the equilibrium quantity increases.
c.
the equilibrium price rises.
d.
all of the above
e.
a and c
94. Refer to Exhibit 39-8. Assume that E1 represents the initial equilibrium in the market for grain X. As a result of
increased agricultural productivity, total revenues for farmers in this market will
a.
increase if the demand curve is perfectly inelastic.
b.
increase if the demand curve is inelastic between E1 and E2.
c.
decrease if the demand curve is inelastic between E1 and E2.
d.
decrease if the demand curve is inelastic between E1 and E3.
e.
none of the above
95. Refer to Exhibit 39-8. Assume that E1 represents the initial equilibrium in the market for grain X. If all the farmers
agree to restrict production and abide by the agreement,
a.
the price of X increases.
b.
the equilibrium quantity decreases.
c.
total revenues increase if the demand curve is inelastic between E1 and E3.
d.
all of the above
e.
a and b only
96. Assume that the farmers know that their revenues would increase if each would take a certain amount of acreage out
of production. An agreement to do so
a.
would not be made because the farmers have no incentive to enter into it.
b.
would not be made because it would contradict the assumption that farmers are profit maximizers.
c.
probably would not be adhered to, if made, because it would be disadvantageous for the farmers as a group.
d.
probably would not last, if made, because each farmer would have an incentive to break it.
97. A potato farmer who signs a futures contract is
a.
speculating on the future price of potatoes, hoping it will be higher.
b.
speculating on the future price of potatoes, hoping it will be lower.
c.
eliminating his exposure to risk from a falling potato price.
d.
trying to influence the price of potatoes to rise.
98. If a farmer rents the land he works on, then any price support or deficiency payments he receives __________
capitalized into the value of that land, and so his economic profit from farming __________.
a.
are; goes to zero
b.
are; remains positive
c.
are not; goes to zero
d.
are not; remains positive
99. Rising demand for an agricultural good __________ the payments government is committed to pay farmers under a
__________ program.
a.
raises; production flexibility contract
b.
raises; deficiency payment
c.
lowers; production flexibility contract
d.
lowers; deficiency payment
100. An increase in the supply of corn will lower the total revenue from corn if
a.
the demand curve for corn is inelastic between the current and new price of corn.
b.
the demand curve for corn is elastic between the current and new price of corn.
c.
there are many substitutes for corn.
d.
there are only a few substitutes for corn.
e.
none of the above
101. Suppose the demand curve for corn is inelastic between the current price and price that exists after the supply of corn
falls. It follows that
a.
fewer farmers are producing corn at the new price than at the old price.
b.
the total revenue for corn is lower at the new price than at the old price.
c.
the total revenue for corn is higher at the new price than at the old price.
d.
more farmers are producing corn at the new price than at the old price.
e.
a and c
102. The productivity of the agriculture sector (of the economy) increases dramatically. A likely consequence is:
a.
increased resources flowing into the agriculture sector.
b.
an increase in the supply of foodstuffs and lower prices for foodstuffs.
c.
an increase in the total revenue (farmers' receive) from selling foodstuffs, assuming the demand for their
products is elastic.
d.
a decrease in the total revenue (farmers' receive) from selling foodstuffs, assuming the demand for their
products is inelastic.
e.
none of the above
103. Which of the following statements represents a correct sequence of events?
a.
Productivity rises in the agriculture sector, the supply curve of foodstuffs shifts to the left, price rises, and total
revenue rises assuming demand is inelastic.
b.
Productivity rises in the agriculture sector, the supply curve of foodstuffs shifts to the right, price rises, and
total revenue rises assuming demand is inelastic.
c.
Productivity rises in the agriculture sector, the supply curve of foodstuffs shifts to the right, price falls, and
total revenue falls assuming demand is elastic.
d.
Productivity rises in the agriculture sector, the supply curve of foodstuffs shifts to the left, price falls, and total
revenue rises assuming demand is elastic.
e.
none of the above
104. Suppose farmers agree to reduce their supply of foodstuffs. The most likely reason they would want to do this is they
believe that less supply
a.
means higher prices and higher total revenue.
b.
means consumers will buy more of what they have to sell.
c.
translates into higher-quality foodstuffs and that the higher the quality of the foodstuffs they sell, the higher
the prices for what they sell.
d.
will get Congress to favor them with agriculture subsidies.
e.
will get Congress to decrease their taxes.
105. Assuming the demand for their products is inelastic, farmers (as a group) have an incentive to
a.
increase the supply of what they sell.
b.
agree among themselves to decrease the supply of what they sell.
