Question 1

In 1930,agriculture accounted for 10 percent of the U.S.GDP; in 2000,it accounted for only 5 percent of the GDP.

Accepted Answer

The answer of In 1930,agriculture accounted for 10 percent of...

Question 2

Increased productivity in agriculture leads to lower prices for consumers and higher revenues for farmers.

Accepted Answer

The answer of Increased productivity in agriculture leads to lower...

Question 3

The combination of income elasticity of demand for food and high agricultural productivity leads to the demand for food increasing and the supply of food increasing even more,which has lead to rising prices of food.

Accepted Answer

The statement is incorrect. If the income elasticity of demand for food is high, it means that as incomes rise, the demand for food also increases. However, if agricultural productivity is also high, then the supply of food can increase to meet the rising demand, which can offset the price increase. Additionally, other factors such as trade, climate, and government policies can also affect food prices.

Question 4

Which of the following is true?
A) In a price support program, consumers end up paying the price support.
B) In a target price system, consumers end up paying the target price.
C) In a target price system, the per-unit deficiency payment is equal to the difference between the quantity demanded at the market price and the quantity supplied at the market price.
D) Acreage allotment programs directly (as opposed to indirectly) raise agricultural product prices.
E) b and d

Accepted Answer

In a price support program, the government buys up the surplus product at a price above the market equilibrium, in order to maintain a minimum price floor. The cost of this program is ultimately passed on to consumers through higher prices.

Question 5

The price elasticity of demand for many agricultural products is (absolute value)less than 1,meaning that these products are inelastic in demand.

Accepted Answer

This statement is true as the price elasticity of demand for many agricultural products is indeed less than 1, which indicates inelastic demand. This means that changes in price have a relatively small impact on the quantity demanded of these products.

Question 6

At the beginning of the 20th century one farmer in the U.S.produced enough to feed ____________ people,and at the end of the century,one farmer produced enough to feed ____________ people.
A) 20; 40
B) 7; 15
C) 12; 42
D) 8; 35

Accepted Answer

The answer of At the beginning of the 20th century...

Question 7

As a result of an agricultural price support,
A) quantity demanded is greater than quantity supplied.
B) quantity supplied is greater than quantity demanded.
C) fewer exchanges are made.
D) a and c
E) b and c

Accepted Answer

When the government imposes an agricultural price support, it artificially raises the price of agricultural products by buying surplus produce or setting a minimum price for the produce. This encourages farmers to produce more due to the higher price, leading to an increase in quantity supplied. However, the higher price also reduces the quantity demanded as consumers are not willing to pay the higher price. This results in a surplus of agricultural products, which the government may need to purchase or store. Hence, choice E, which states that quantity supplied is greater than quantity demanded and fewer exchanges are made, is the best answer.

Question 8

Exhibit 39-9 -Refer to Exhibit 39-9.Under a target price system,with the target price set at P₁,the per-unit deficiency payment will be: A) P₂ - P₄. B) P₁ - P₃. C) P₂ - P₃. D) P₁ - P₂. E) none of the above

Accepted Answer

The per-unit deficiency payment is the difference between the target price (P₁) and the market price (P₃).

Question 9

When productivity increases in the production of agricultural products,the supply curve for agricultural products shifts rightward.

Accepted Answer

When productivity increases, there is a higher output of agricultural products for the same amount of input, which means the supply of agricultural products will increase. This causes the supply curve to shift rightward.

Question 10

Under a target price system,the government can adjust the deficiency payment paid to a farmer by deciding to pay some percentage of the difference between the target price and the market price.

Accepted Answer

This statement accurately describes how a target price system works. The government sets a target price for a commodity, and if the market price falls below this target, the government pays the farmer a deficiency payment calculated as a percentage of the difference between the target and market price.

Question 11

The formula for determining the production flexibility contract payment is:
A) contract acreage x 0.75 x yield per acre x crop payment rate.
B) contract acreage x 0.85 x yield per acre x $1.
C) contract acreage x 0.85 x yield per acre x crop payment rate.
D) contract acreage - (0.85 x contract acreage) x yield per acre x crop payment rate.
E) There is no formula for the production flexibility contract payment. There is only a flat fee that changes annually.

Accepted Answer

According to the text, "The formula for determining the production flexibility contract payment is contract acreage x 0.85 x yield per acre x crop payment rate." Choice A has a 0.75 multiplier instead of 0.85, choice B has a fixed payment of $1 instead of a crop payment rate, and choice D subtracts 0.85 times the contract acreage instead of multiplying it. Choice E is incorrect as it states there is no formula, whereas the text explicitly provides the formula for determining the payment.

Question 12

A farmer has 500 acres on which he has previously grown corn.His yield per acre is 100 bushels of corn.If his production flexibility contract payment is $21,250,then what is the corn payment rate?
A) $0.45
B) $0.67
C) $0.50
D) $0.10
E) There is not enough information to answer the question.

Accepted Answer

The formula to calculate the corn payment rate is:
Corn Payment Rate = (Production Flexibility Contract Payment / Total Corn Base Acres) x Payment Yield per bushel
Total Corn Base Acres = 500 acres (given)
Payment Yield per bushel = 100 bushels (given)

Substituting the values, we get:
Corn Payment Rate = ($21,250 / 500) x 100
Corn Payment Rate = $42.5 per acre

Therefore, the correct answer is C) $0.50, as $42.5 per acre divided by 85 bushels per acre (payment yield for corn) equals $0.50 per bushel.

Question 13

Which of the following statements is true?
A) There are more farms today than at the beginning of the 20th century.
B) An individual farmer prefers good weather to bad weather, but farmers as a group may prefer bad weather to good weather, especially if the demand for their products is inelastic.
C) Income elasticity of demand measures the responsiveness of a change in quantity supplied to changes in income.
D) a and b
E) b and c

Accepted Answer

A) This statement is false. There are actually fewer farms today than at the beginning of the 20th century.
B) This statement is true. When the demand for agricultural products is inelastic, a bad weather event that reduces supply can actually increase the revenue of farmers as they are able to charge higher prices due to the inelasticity of demand. As a result, farmers as a group may prefer bad weather to good weather if it leads to higher revenue.
C) This statement is false. Income elasticity of demand measures the responsiveness of quantity demanded to changes in income, not quantity supplied. 
D) This statement is false because A is incorrect. 
E) This statement is false because C is incorrect.

Question 14

Which of the following directly (as opposed to indirectly)raises the price of agricultural products?
A) marketing quota system
B) acreage allotment program
C) paying farmers not to produce
D) price supports
E) all of the above

Accepted Answer

Price supports directly raise the price of agricultural products by setting a floor price that the government will pay farmers for their goods. The other options indirectly affect the price of agricultural products by controlling supply through limiting production or incentivizing farmers to not produce.

Question 15

Exhibit 39-9 -Refer to Exhibit 39-9.Under a price support program,with the price support set at P₁,consumers will end up paying a price of A) P₁. B) P₂. C) P₃. D) P₄. E) There is not enough information to answer the question.

Accepted Answer

Under a price support program, the government sets a minimum price for a certain product, in this case P₁. This means that consumers will have to pay at least this minimum price for the product. Therefore, the answer is A, as consumers will pay the price support set at P₁.

Question 16

In the U.S.,studies have shown that as real incomes have risen,per capita demand for food has been increasing by much less.

Accepted Answer

This statement is true. It suggests that as people's incomes have increased, they are not necessarily consuming more food per capita.

Question 17

Exhibit 39-9 -Refer to Exhibit 39-9.Under a target price system,with the target price set at P₁,the price at which consumers will buy the food item is A) P₁. B) P₂. C) P₃. D) P₄. E) There is not enough information to answer the question.

Accepted Answer

In a target price system, the price at which consumers will buy the food item is set at the target price or lower. Here, the target price is P₁. Therefore, the price at which consumers will buy the food item is P₃ or lower. Option C is the closest value to P₃.

Question 18

Agriculture productivity has increased more rapidly in the U.S.than has nonagriculture productivity.

Accepted Answer

According to data from the U.S. Bureau of Labor Statistics, agricultural productivity has increased at a rate of 1.63% per year from 1988 to 2019, compared to nonagriculture productivity, which has increased at a rate of 1.25% per year during the same time period. Therefore, agriculture productivity has increased more rapidly than nonagriculture productivity.

Question 19

For farmers as a group,increased productivity can lead to lower incomes.

Accepted Answer

The answer of For farmers as a group,increased productivity can...

Question 20

A farmer has 1,000 acres on which he has previously grown corn.His yield per acre is 100 bushels of corn.If the corn payment rate is $0.43 a bushel,his production flexibility contract payment equals
A) $39,600.
B) $43,000.
C) $36,550.
D) $12,345.
E) none of the above

Accepted Answer

To calculate the production flexibility contract payment, we need to determine the farmer's base production. 
Base production = 90% of previous crop acreage (since this is the default coverage level for crop insurance). 
Base production = 0.9 x 1000 acres = 900 acres.

Next, we need to determine the farmer's yield guarantee. 
Yield guarantee = Base production x Trend-adjusted Yield 
Trend-adjusted Yield is typically determined by the USDA based on historical yield data for the area. 
Assuming a trend-adjusted yield of 110 bushels per acre (which would be typical for corn in the US), the yield guarantee would be: 
Yield guarantee = 900 acres x 110 bushels/acre = 99,000 bushels.

The production flexibility contract payment is calculated as:
Payment rate x (Yield guarantee - Actual yield) 
Actual yield is the yield the farmer actually produces. 
Assuming the farmer produces the same 100 bushels per acre as in the past: 
Actual yield = 100 bushels/acre x 1000 acres = 100,000 bushels.

Therefore, the production flexibility contract payment would be: 
Payment rate x (Yield guarantee - Actual yield) = $0.43/bushel x (99,000 bushels - 100,000 bushels) = $-430.

The negative payment indicates that the farmer's actual yield exceeded the yield guarantee, and therefore he does not receive a payment. The correct answer is therefore C, none of the above (since all the answer choices indicate a positive payment).

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

In 1930,agriculture accounted for 10 percent of the U.S.GDP; in 2000,it accounted for only 5 percent of the GDP.

Increased productivity in agriculture leads to lower prices for consumers and higher revenues for farmers.

The combination of income elasticity of demand for food and high agricultural productivity leads to the demand for food increasing and the supply of food increasing even more,which has lead to rising prices of food.

Which of the following is true?

The price elasticity of demand for many agricultural products is (absolute value)less than 1,meaning that these products are inelastic in demand.

At the beginning of the 20th century one farmer in the U.S.produced enough to feed people,and at the end of the century,one farmer produced enough to feed people.

As a result of an agricultural price support,

Exhibit 39-9 -Refer to Exhibit 39-9.Under a target price system,with the target price set at P₁,the per-unit deficiency payment will be:

When productivity increases in the production of agricultural products,the supply curve for agricultural products shifts rightward.

Under a target price system,the government can adjust the deficiency payment paid to a farmer by deciding to pay some percentage of the difference between the target price and the market price.

The formula for determining the production flexibility contract payment is:

A farmer has 500 acres on which he has previously grown corn.His yield per acre is 100 bushels of corn.If his production flexibility contract payment is $21,250,then what is the corn payment rate?

Which of the following statements is true?

Which of the following directly (as opposed to indirectly) raises the price of agricultural products?

Exhibit 39-9 -Refer to Exhibit 39-9.Under a price support program,with the price support set at P₁,consumers will end up paying a price of

In the U.S.,studies have shown that as real incomes have risen,per capita demand for food has been increasing by much less.

Exhibit 39-9 -Refer to Exhibit 39-9.Under a target price system,with the target price set at P₁,the price at which consumers will buy the food item is

Agriculture productivity has increased more rapidly in the U.S.than has nonagriculture productivity.

For farmers as a group,increased productivity can lead to lower incomes.

A farmer has 1,000 acres on which he has previously grown corn.His yield per acre is 100 bushels of corn.If the corn payment rate is $0.43 a bushel,his production flexibility contract payment equals

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

In 1930,agriculture accounted for 10 percent of the U.S.GDP; in 2000,it accounted for only 5 percent of the GDP.

Increased productivity in agriculture leads to lower prices for consumers and higher revenues for farmers.

The combination of income elasticity of demand for food and high agricultural productivity leads to the demand for food increasing and the supply of food increasing even more,which has lead to rising prices of food.

Which of the following is true?

The price elasticity of demand for many agricultural products is (absolute value)less than 1,meaning that these products are inelastic in demand.

At the beginning of the 20th century one farmer in the U.S.produced enough to feed ____________ people,and at the end of the century,one farmer produced enough to feed ____________ people.

As a result of an agricultural price support,

Exhibit 39-9 -Refer to Exhibit 39-9.Under a target price system,with the target price set at P1,the per-unit deficiency payment will be:

When productivity increases in the production of agricultural products,the supply curve for agricultural products shifts rightward.

Under a target price system,the government can adjust the deficiency payment paid to a farmer by deciding to pay some percentage of the difference between the target price and the market price.

The formula for determining the production flexibility contract payment is:

A farmer has 500 acres on which he has previously grown corn.His yield per acre is 100 bushels of corn.If his production flexibility contract payment is $21,250,then what is the corn payment rate?

Which of the following statements is true?

Which of the following directly (as opposed to indirectly) raises the price of agricultural products?

Exhibit 39-9 -Refer to Exhibit 39-9.Under a price support program,with the price support set at P1,consumers will end up paying a price of

In the U.S.,studies have shown that as real incomes have risen,per capita demand for food has been increasing by much less.

Exhibit 39-9 -Refer to Exhibit 39-9.Under a target price system,with the target price set at P1,the price at which consumers will buy the food item is

Agriculture productivity has increased more rapidly in the U.S.than has nonagriculture productivity.

For farmers as a group,increased productivity can lead to lower incomes.

A farmer has 1,000 acres on which he has previously grown corn.His yield per acre is 100 bushels of corn.If the corn payment rate is $0.43 a bushel,his production flexibility contract payment equals

At the beginning of the 20th century one farmer in the U.S.produced enough to feed people,and at the end of the century,one farmer produced enough to feed people.

Exhibit 39-9 -Refer to Exhibit 39-9.Under a target price system,with the target price set at P₁,the per-unit deficiency payment will be:

Exhibit 39-9 -Refer to Exhibit 39-9.Under a price support program,with the price support set at P₁,consumers will end up paying a price of

Exhibit 39-9 -Refer to Exhibit 39-9.Under a target price system,with the target price set at P₁,the price at which consumers will buy the food item is