1. Historically, many aspects of U.S. farm policies had their origins in the:
A.Agricultural Extension Service Act.
B.Agricultural Adjustment Act.
C.Homestead Act.
D.Land Grant Act.

2. If in a certain year the indices of prices received and paid by farmers were 115 and 142 respectively, the parity ratio would be:

3. Which of the following statements best describes the parity concept?
A.The prices of farm commodities should vary inversely with changes in the prices-paid index for farmers.
B.Because of productivity increases, farmers are entitled to the same real income for a smaller volume of output.
C.The money incomes of farmers should always be the same, regardless of increases or decreases in the prices of the products they buy.
D.The production of a given real output entitles the producer to the same real income over time.

R-1 F33040

Refer to the above diagram for the corn market. What effect will a price support of B have on the gross income of farmers?
A.Gross income will be unchanged, although profits will rise.
B.Gross income will increase from 0MFG to 0BKL.
C.Gross income will increase from 0AJH to 0BCG.
D.Gross income will decrease from 0BCG to 0BKL.

5. If prices received by farmers decline and prices paid by farmers increase, the parity ratio will decline.

6. Because government price supports cause surplus production, government policies have been designed to:
A.increase demand and decrease supply of farm products.
B.decrease demand and increase supply of farm products.
C.increase demand and increase supply of farm products.
D.decrease demand and decrease supply of farm products.

7. Farm programs such as those of the United States and the European Union cause a misallocation of international agricultural resources primarily because:
A.they distort domestic and world agricultural prices.
B.they inhibit technological progress in agriculture.
C.production and trade occur on the basis of comparative advantage.
D.price supports are set below market-clearing levels.

8. Which of the following statements is correct?
A.Price supports may induce either an underallocation or an overallocation of resources to farm products.
B.Supported prices have no effect on the allocation of resources to farm products.
C.Supported prices induce an underallocation of resources to farm products.
D.Price supports induce an overallocation of resources to farm products.

9. Which of the following would, other things equal, reduce the demand for U.S. farm products?
A.poorer crops abroad
B.strong economic growth abroad
C.improved trade relations with China and Russia
D.appreciation of the U.S. dollar

10. Acreage allotment programs were designed to:
A.reduce the supply of agricultural products.
B.make the demand for farm products more price elastic.
C.bolster the demand for agricultural commodities.
D.accelerate the movement of human resources out of farming.

11. One consequence of the long-run farm problem has been a:
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.

12. Productivity increases in agriculture have:
A.increased the demand for foodstuffs.
B.been negligible since the Second World War.
C.increased the incomes of farm households above the national average.
D.lowered farm prices.

13. If the demand for agricultural products is inelastic, a relatively small increase in supply will cause farm prices and incomes to decline.

14. The growing importance of export demand for American agriculture has:
A.reduced the international value of the dollar.
B.had no significant effect on the stability of the demand for farm products.
C.destabilized the total demand for farm products.
D.stabilized the total demand for farm products.

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

16. Which country has the smallest percentage of its labor force employed in agriculture?

R-2 F33010

Refer to the above diagram. If farmers produce a normal crop of Qn, their gross income:
A.will be 0PpPNQn.
B.will be 0PnNQn.
C.will be Pp × Qn.
D.cannot be determined.

18. As applied to agriculture, the special-interest effect suggests that:
A.urban legislators support farm legislation in exchange for rural legislators supporting urban-oriented legislation.
B.a relatively small number of farmers receive large benefits at the expense of a much larger group of taxpayers who individually suffer small losses.
C.politicians support farm subsidies because most of the associated costs are hidden rather than explicit.
D.the size of farm subsidies should vary directly with a farmer's earned income.

19. Agriculture is overcrowded because of absolute and relative increases in the size of farm employment.

20. Since 1950, U.S. farm exports have:
A.increased more rapidly than U.S. farm output.
B.declined as a percentage of U.S. farm output.
C.average about 10 percent of U.S. farm output.
D.averaged about 50 percent of U.S. farm output.

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