Question 1

Exhibit 39-6
 
-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

Accepted Answer

If the demand curve is more elastic, a shift in the supply curve will result in a smaller change in price and total revenue.

Question 2

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.

Accepted Answer

Each farmer would have an incentive to break the agreement because by violating it, they could increase their own production and profits. This illustrates the concept of the prisoner's dilemma, where individual self-interest can lead to a suboptimal outcome for the group as a whole.

Question 3

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.

Accepted Answer

By signing a futures contract, the potato farmer is hedging against the risk of a falling potato price. This means that even if the price of potatoes falls in the future, the farmer will still receive the price agreed upon in the futures contract. Therefore, the farmer is not speculating on the future price of potatoes, but rather eliminating his exposure to risk. The other choices are incorrect as they involve speculation or manipulation of the market, which is not the purpose of a futures contract.

Question 4

Exhibit 39-4
 
-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

Accepted Answer

At a target price of $4 per bushel, the equilibrium point is where the quantity demanded equals the quantity supplied, which is at 450 bushels. Therefore, at this price, the private sector would spend:

$4/bushel x 450 bushels = $1,800

Question 5

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

Accepted Answer

The answer of If a farmer rents the land he...

Question 6

Exhibit 39-4
 
-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

Accepted Answer

The answer of Exhibit 39-4
 
-Refer to Exhibit 39-4.At a...

Question 7

Exhibit 39-4
 
-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

Accepted Answer

The answer of Exhibit 39-4
 
-Refer to Exhibit 39-4.At a...

Question 8

Exhibit 39-4
 
-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

Accepted Answer

The answer of Exhibit 39-4
 
-Refer to Exhibit 39-4.Under a...

Question 9

Exhibit 39-8 -Refer to Exhibit 39-8.Assume that E₁represents 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

Accepted Answer

Restricting production will decrease supply, leading to an increase in price (A) and a decrease in equilibrium quantity (B). If demand is inelastic, total revenues will increase as price increases (C).

Question 10

Exhibit 39-4
 
-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.

Accepted Answer

The answer of Exhibit 39-4
 
-Refer to Exhibit 39-4.At the...

Question 11

Exhibit 39-7 -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.

Accepted Answer

Population growth increases demand, and increased agricultural productivity increases supply. The new equilibrium will be at a higher quantity and lower price than the initial equilibrium.

Question 12

Exhibit 39-4
 
-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

Accepted Answer

The answer of Exhibit 39-4
 
-Refer to Exhibit 39-4.If the...

Question 13

Exhibit 39-5
 
-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.

Accepted Answer

Supply curve S3 represents a more inelastic supply, which means that changes in demand will have a smaller effect on the price of corn. This leads to lower volatility in both price and total revenue in the market.

Question 14

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

Accepted Answer

The answer of Rising demand for an agricultural good __________...

Question 15

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

Accepted Answer

If the demand curve for corn is elastic, then a decrease in price (caused by an increase in supply) will lead to a larger percentage increase in quantity demanded, which means that the increase in revenue from selling more corn will be outweighed by the decrease in revenue from the lower price. Therefore, an increase in supply of corn will lower the total revenue from corn if the demand curve for corn is elastic between the current and new price of corn.

Question 16

Exhibit 39-8 -Refer to Exhibit 39-8.Assume that E₁represents 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

Accepted Answer

The breakthrough in genetic engineering would likely increase the supply of grain X, shifting the supply curve rightward, leading to an increase in equilibrium quantity and a decrease in equilibrium price.

Question 17

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

Accepted Answer

The answer of If the government attempts to aid farmers...

Question 18

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

Accepted Answer

The answer of Stating that income elasticity of demand for...

Question 19

Exhibit 39-8 -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

Accepted Answer

The answer of Exhibit 39-8
 
-Refer to Exhibit 39-8.Assume that...

Question 20

Exhibit 39-7 -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.

Accepted Answer

The answer of Exhibit 39-7 -Refer to Exhibit 39-7.Let E₁...

Quiz 39: Agriculture: Problems, Policies, and Unintended Effects

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 potato farmer who signs a futures contract is

Exhibit 39-4 -Refer to Exhibit 39-4.At a target price of $4 per bushel,how much does the private sector spend on wheat?

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 .

Exhibit 39-4 -Refer to Exhibit 39-4.At a target price of $4 per bushel,how many bushels of wheat are produced?

Exhibit 39-4 -Refer to Exhibit 39-4.At a target price of $4 per bushel,what price does the consumer pay?

Exhibit 39-4 -Refer to Exhibit 39-4.Under a price support program of $4 per bushel,how many bushels of surplus wheat does the government purchase?

Exhibit 39-8 -Refer to Exhibit 39-8.Assume that E₁represents the initial equilibrium in the market for grain X.If all the farmers agree to restrict production and abide by the agreement,

Exhibit 39-4 -Refer to Exhibit 39-4.At the government-established support price of $5 per bushel,the wheat surplus that government buys equals

Exhibit 39-7 -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

Exhibit 39-4 -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.

Exhibit 39-5 -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?

Rising demand for an agricultural good the payments government is committed to pay farmers under a program.

An increase in the supply of corn will lower the total revenue from corn if

Exhibit 39-8 -Refer to Exhibit 39-8.Assume that E₁represents 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,

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

Stating that income elasticity of demand for potatoes equals 0.15 is equivalent to stating that if income

Exhibit 39-8 -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

Exhibit 39-7 -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