Question 1

If the demand curve for wheat is inelastic, then total farm income from wheat will be

Accepted Answer

A)  higher in years of low yields and lower in years of high yields.
B)  lower in years of low yields and higher in years of high yields.
C)  higher in years of falling prices.
D)  lower in years of rising prices.E) B) and C)
F) A) and D)

Question 2

The percentage of total employment in the U.S.that is accounted for by farms has been declining in the last six decades or so, but the absolute number of farm employment has actually risen slightly over those decades.

Accepted Answer

A) True 
 B)False

Question 3

Public choice theory would suggest that the lobbying of Congress by farm organizations for legislation that would increase the appropriations from the U.S.government for agricultural programs is an example of

Accepted Answer

A)  revealed preference.
B)  rent-seeking behavior.
C)  the paradox of voting.
D)  the median voter model.E) None of the above
F) A) and B)

Question 4

Given the short-run instability of farm incomes, many farmers use some form of "hedging" to smooth out their incomes over time, including the following, except

Accepted Answer

A)  crop revenue insurance.
B)  futures markets.
C)  contracting with processors.
D)  forming a cartel to fix prices.E) None of the above
F) All of the above

Question 5

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

Accepted Answer

A)  the special-interest effect.
B)  political logrolling.
C)  the paradox of voting.
D)  cost-benefit analysis.E) B) and D)
F) B) and C)

Question 6

A major criticism of agricultural subsidies is that

Accepted Answer

A)  they restrict agricultural output but reduce farm incomes when demand is inelastic.
B)  the principal beneficiaries of these subsidies have been foreign farmers and not domestic farmers.
C)  they duplicate other economic policies that are designed to increase the prices for agricultural products.
D)  they do not address the misallocation of resources between agriculture and the rest of the economy.E) B) and C)
F) A) and C)

Question 7

Which statement best characterizes the long-run decline in the agricultural industry?

Accepted Answer

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.
B)  The growth in the supply of farm products has exceeded the growth in the demand for such products, causing falling farm product prices and falling farm income.
C)  The supply of farm products has increased while the demand for such products has decreased, causing falling farm product prices and falling farm income.
D)  The demand for farm products has increased while the supply of such products has decreased, causing rising farm product prices and rising farm income.E) A) and C)
F) A) and B)

Question 8

The federal government has not paid subsidies to farmers since passage of the Freedom to Farm Act in 1996.

Accepted Answer

A) True 
 B)False

Question 9

Farm programs such as those maintained by the European Union (EU)  and the United States

Accepted Answer

A)  aid developing nations by creating a large market for agriculture.
B)  decrease the incomes of farmers in EU nations and in the United States.
C)  improve efficiency in the allocation of agricultural resources.
D)  distort world trade in agricultural products.E) C) and D)
F) A) and D)

Question 10

As a nation's average household income rises, the percentage of household income that goes to food expenditures also increases.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following best describes the main problem faced by farms in the long run?

Accepted Answer

A)  Lagging technology has decreased the productivity of farmers and therefore resulted in low farm prices and incomes.
B)  The highly inelastic nature of agricultural demand has caused small year-to-year fluctuations in farm output to result in highly unstable farm incomes.
C)  The supply of farm products has increased relative to the demand for them, and, because demand is inelastic, farm prices and incomes have therefore declined.
D)  The demand for farm products has increased relative to their supply, but the highly elastic nature of agricultural demand has caused these shifts to result in declining farm incomes.E) C) and D)
F) All of the above

Question 12

The movement to eliminate agricultural subsidies in the U.S.and make farmers rely more on market forces, starting with the Farm Act of 1996, continues to this day.

Accepted Answer

A) True 
 B)False

Question 13

(Last Word)  The U.S.sugar program

Accepted Answer

A)  decreases the domestic price of sugar.
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.E) All of the above
F) C) and D)

Question 14

Over the past several decades, farm employment has

Accepted Answer

A)  grown absolutely but declined as a percentage of total employment.
B)  declined both absolutely and as a percentage of total employment.
C)  increased both absolutely and as a percentage of total employment.
D)  declined absolutely but increased as a percentage of total employment.E) A) and D)
F) None of the above

Question 15

Due to high fixed costs relative to variable costs in farming, farm production is quite sensitive to price changes in the short run.

Accepted Answer

A) True 
 B)False

Question 16

Price supports in agriculture have been criticized because they

Accepted Answer

A)  have hastened the exodus of labor from agriculture.
B)  subsidize consumers at the expense of farmers.
C)  help large farmers more than small farmers.
D)  create product shortages.E) None of the above
F) All of the above

Question 17

Expanding per capita incomes in the United States have resulted in a(n)

Accepted Answer

A)  more-than-proportionate increase in the demand for agricultural products.
B)  proportionate increase in the demand for agricultural products.
C)  less-than-proportionate increase in the demand for agricultural products.
D)  absolute decline in the amount of agricultural products consumed.E) All of the above
F) B) and C)

Question 18

About 10 percent of the U.S.labor force is in agriculture.

Accepted Answer

A) True 
 B)False

Question 19

(Consider This)  Which of the following methods is commonly used by farmers to "smooth" income over time?

Accepted Answer

A)  producing only one crop to benefit from specialization
B)  renting land from other farmers to increase production
C)  entering contracts with buyers of their farm output to assure themselves of a fixed price
D)  All of these risk-management techniques are used to hedge against short-run price and output fluctuations.E) B) and D)
F) A) and B)

Question 20

(Consider This)  Which of the following methods is used by farmers to "hedge" against short-run price and output fluctuations?

Accepted Answer

A)  securing prices for their output in the futures market
B)  purchasing crop revenue insurance to insure against natural disasters
C)  leasing land to other farmers in return for stable rent payments
D)  All of these risk-management techniques are used.E) A) and B)
F) A) and C)

Exam 22: Agriculture: Economics and Policy

Price supports in agriculture have been criticized because they

Correct AnswerverifiedShow Answer

Given the short-run instability of farm incomes, many farmers use some form of "hedging" to smooth out their incomes over time, including the following, except

Correct AnswerverifiedShow Answer

(Last Word) The U.S.sugar program

Correct AnswerverifiedShow Answer

(Consider This) Which of the following methods is used by farmers to "hedge" against short-run price and output fluctuations?

Correct AnswerverifiedShow Answer

A major criticism of agricultural subsidies is that

Correct AnswerverifiedShow Answer

If the demand curve for wheat is inelastic, then total farm income from wheat will be

Correct AnswerverifiedShow Answer

Due to high fixed costs relative to variable costs in farming, farm production is quite sensitive to price changes in the short run.

Correct AnswerverifiedShow Answer

Expanding per capita incomes in the United States have resulted in a(n)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Public choice theory would suggest that the lobbying of Congress by farm organizations for legislation that would increase the appropriations from the U.S.government for agricultural programs is an example of

Correct AnswerverifiedShow Answer

Which of the following best describes the main problem faced by farms in the long run?

Correct AnswerverifiedShow Answer

(Consider This) Which of the following methods is commonly used by farmers to "smooth" income over time?

Correct AnswerverifiedShow Answer

The federal government has not paid subsidies to farmers since passage of the Freedom to Farm Act in 1996.

Correct AnswerverifiedShow Answer

As a nation's average household income rises, the percentage of household income that goes to food expenditures also increases.

Correct AnswerverifiedShow Answer

Over the past several decades, farm employment has

Correct AnswerverifiedShow Answer

Farm programs such as those maintained by the European Union (EU) and the United States

Correct AnswerverifiedShow Answer

The movement to eliminate agricultural subsidies in the U.S.and make farmers rely more on market forces, starting with the Farm Act of 1996, continues to this day.

Correct AnswerverifiedShow Answer

Which statement best characterizes the long-run decline in the agricultural industry?

Correct AnswerverifiedShow Answer

About 10 percent of the U.S.labor force is in agriculture.

Correct AnswerverifiedShow Answer

The percentage of total employment in the U.S.that is accounted for by farms has been declining in the last six decades or so, but the absolute number of farm employment has actually risen slightly over those decades.

Correct AnswerverifiedShow Answer

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