Question 1

Which of the following arguments is not generally made to justify farm subsidies?

Accepted Answer

A)   The "family farm" is an American institution that should be protected and nurtured.
B)   Agribusiness firms need subsidies to achieve economies of scale.
C)   Farmers sell their output in purely competitive markets but must buy inputs from imperfectly competitive firms.
D)   Farmers cannot fully insure themselves against the risks unusual to farming, such as floods, droughts, and pests.E) A) and B)
F) A) and C)

Question 2

Comparing an acreage allotment program versus a taxpayer-subsidized price-support program, the acreage allotment program

Accepted Answer

A)   and the price-support program have similar costs to the taxpayers.
B)   imposes a smaller cost on the taxpayers.
C)   imposes a larger cost on the taxpayers.
D)   does not impose a cost on the consumers.E) A) and C)
F) A) and D)

Question 3

The Agricultural Act of 2014

Accepted Answer

A)   maintained the "freedom to plant" and "direct-payment" features of the Freedom to Farm Act of 1996, and also provided countercyclical payments and marketing loans to assist farmers.
B)   restored the U.S. price support system (for currently grown crops)  that was ended in the Freedom to Farm Act of 1996.
C)   ended the "freedom to plant" approach of the Freedom to Farm Act of 1996 and restored acreage allotments.
D)   ended both direct payments and countercyclical payments to farmers.E) None of the above
F) B) and D)

Question 4

The purpose of the Freedom to Farm Act of 1996 was to

Accepted Answer

A)   immediately end U.S. farm subsidies.
B)   end 60 years of U.S. price supports for American grain crops.
C)   eliminate U.S. tariffs and quotas on imported farm goods.
D)   stabilize short-run crop prices.E) C) and D)
F) A) and B)

Question 5

The Agricultural Act of 2014 does not address the fundamental problem of agricultural subsidies, which is that those subsidies

Accepted Answer

A)   reduce work incentive for farmers, thus reducing agricultural production.
B)   slow the exodus of resources from agriculture, increase production of agricultural products, and reduce crop prices and market incomes.
C)   increase the exodus of resources from agriculture and reduce investments by farmers in land and equipment.
D)   are based on past agricultural production and not on current agricultural production.E) None of the above
F) All of the above

Question 6

The demand for most agricultural products is

Accepted Answer

A)   elastic with respect to price but inelastic with respect to income.
B)   inelastic with respect to price but elastic with respect to income.
C)   elastic with respect to both price and income.
D)   inelastic with respect to both price and income.E) B) and D)
F) A) and B)

Question 7

As a result of the acreage allotment programs, we would expect

Accepted Answer

A)   the best farmland to be taken out of production by farmers.
B)   the worst farmland to be taken out of production by farmers.
C)   lower farm incomes.
D)   lower farm prices.E) B) and D)
F) B) and C)

Question 8

(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) C) and D)

Question 9

An example of the special interest effect is a farm program from which a large group receives small benefits at the expense of a smaller group who individually suffer large losses.

Accepted Answer

A) True 
 B)False

Question 10

The major economic problem with recent farm policies is that they provide price and income subsidies that

Accepted Answer

A)   are insufficient to keep farmers producing.
B)   increase the demand for farm products.
C)   slow the exodus of resources from agriculture.
D)   limit production to the most profitable products.E) A) and B)
F) C) and D)

Question 11

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) A) and C)

Question 12

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) All of the above
F) A) and B)

Question 13

Farm share of U.S. GDP has

Accepted Answer

A)   declined from about 12 percent in 1950 to 1 percent today.
B)   declined from about 12 percent in 1950 to 7 percent today.
C)   declined from about 7 percent in 1950 to 1 percent today.
D)   remained relatively stable over the past 50 years.E) A) and C)
F) None of the above

Question 14

Domestic price supports on, say, sugar

Accepted Answer

A)   generate trade barriers to reduce imports of foreign sugar.
B)   increase world sugar prices.
C)   keep the domestic price of sugar artificially low.
D)   increase the earnings of foreign sugar producers.E) C) and D)
F) None of the above

Question 15

What has been the effect of the outmigration of people from farming and the consolidation of smaller farms into larger ones on net farm income per farm household?

Accepted Answer

A)   It is now far greater than nonfarm income.
B)   It is now significantly less than nonfarm income.
C)   It has decreased relative to nonfarm incomes.
D)   It has increased relative to nonfarm incomes.E) B) and C)
F) C) and D)

Question 16

One consequence of the long-run problem faced by farms has been a

Accepted Answer

A)   rapid increase in the price of farm output.
B)   massive exit of workers from agriculture to other sectors of the economy.
C)   smaller average farm size.
D)   reduction in U.S. exports of farm products.E) C) and D)
F) A) and B)

Question 17

Which of the following statements best describes the demand for agricultural commodities?

Accepted Answer

A)   It takes a small decline in price to induce a large increase in the amount of agricultural products demanded.
B)   The marginal utility of additional units of agricultural output diminishes very rapidly.
C)   Small increases in income cause demand to increase by a proportionately larger amount.
D)   When price declines, the resulting substitution effect is very large.E) A) and C)
F) A) and B)

Question 18

Agricultural price supports have been criticized because they

Accepted Answer

A)   hasten the exodus of labor from agriculture.
B)   subsidize consumers at the expense of farmers.
C)   help large-scale farmers rather than small farmers.
D)   create product shortages.E) B) and D)
F) B) and C)

Question 19

The fundamental cause of agricultural price and income instability in the United States has been a(n)

Accepted Answer

A)   lack of foreign demand for U.S. agricultural products.
B)   lack of efficiency in the farm sector of the American economy.
C)   underallocation of resources to the farm sector of the economy relative to that of the nonfarm sector.
D)   overallocation of resources to the farm sector of the economy relative to that of the nonfarm sector.E) A) and C)
F) C) and D)

Question 20

Which one of the following would be considered to be a risk management technique used by farmers?

Accepted Answer

A)   changing the parity ratio
B)   increasing product demand
C)   buying more arable farm land
D)   using crop revenue insuranceE) C) and D)
F) A) and B)

Exam 22: Agriculture: Economics and Policy

One consequence of the long-run problem faced by farms has been a

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Agricultural price supports have been criticized because they

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Farm share of U.S. GDP has

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Comparing an acreage allotment program versus a taxpayer-subsidized price-support program, the acreage allotment program

Correct AnswerverifiedShow Answer

The major economic problem with recent farm policies is that they provide price and income subsidies that

Correct AnswerverifiedShow Answer

As a result of the acreage allotment programs, we would expect

Correct AnswerverifiedShow Answer

Which of the following arguments is not generally made to justify farm subsidies?

Correct AnswerverifiedShow Answer

What has been the effect of the outmigration of people from farming and the consolidation of smaller farms into larger ones on net farm income per farm household?

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The Agricultural Act of 2014

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The fundamental cause of agricultural price and income instability in the United States has been a(n)

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Which one of the following would be considered to be a risk management technique used by farmers?

Correct AnswerverifiedShow Answer

Over the past several decades, farm employment has

Correct AnswerverifiedShow Answer

A major criticism of agricultural subsidies is that

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Which of the following statements best describes the demand for agricultural commodities?

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The demand for most agricultural products is

Correct AnswerverifiedShow Answer

The purpose of the Freedom to Farm Act of 1996 was to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Domestic price supports on, say, sugar

Correct AnswerverifiedShow Answer

An example of the special interest effect is a farm program from which a large group receives small benefits at the expense of a smaller group who individually suffer large losses.

Correct AnswerverifiedShow Answer

The Agricultural Act of 2014 does not address the fundamental problem of agricultural subsidies, which is that those subsidies

Correct AnswerverifiedShow Answer

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