Download AGEC 105 - Department of Agricultural Economics

Spring 2010
AGEC 105
Test 3
Capps
Please put the following pieces of information on your scantron:
(a)
(b)
(c)
(d)
Name
UIN #
Section #
Sign the Aggie pledge on the back of your Scantron.
“On my honor, as an Aggie, I have neither given nor
received unauthorized aid on this exam.”
Agec 105, Exam 3, Page 1
Spring 2010
AGEC 105
Test 3
Capps
1. Which of the following statement(s) is (are) true?
(a) If the marginal propensity to save is 0.20, then the marginal propensity to consume is 0.80.
(b) Monpsonists will offer a lower price and buy more input than firms engaging in perfect
competition.
(c) Disposable personal income is inversely related to consumer expenditures as depicted by the
planned consumption function.
(d) All of the above.
2. The Federal Reserve Bank of St. Louis has associated with it the letter code of:
(a) D
(b) H
(c) K
(d) L
3. This legislative act was responsible for the creation of commodity checkoff programs. Name the act.
(a) Clayton Act of 1914
(b) Capper-Volstead Act of 1922
(c) Agricultural Adjustment Act of 1933
(d) Agricultural Marketing Agreement Act of 1937
4. The piece of legislation that not only plugged loopholes in the Sherman Antitrust Act of 1890 but
also created the Federal Trade Commission was:
(a) the Clayton Act of 1914
(b) the Capper-Volstead Act of 1922
(c) the Agricultural Adjustment Act of 1933
(d) the Agricultural Marketing Agreement Act of 1937
5. Which of the following statements is true?
(a) under government intervention, the loan rate is always above the market price.
(b) under government intervention, the target price is always above the loan rate.
(c) under government intervention, the market price is always above the loan rate.
(d) under government intervention, the target price is always above the market price.
Agec 105, Exam 3, Page 2
Use the following graph to answer questions 6 and 7.
PLABOR
MIC
$ 8.0 0
S
$ 6.2 5
$ 5.5 0
MVP
2 00 0
25 00
QLABOR
6. What is the equilibrium quantity of input used and what is the price paid per unit under the condition
of monopsony?
(a) Q Labor = 2000
P Labor = $5.50
(b) Q Labor = 2000
P Labor = $8.00
(c) Q Labor = 2500
P Labor = $6.25
(d) can’t tell; insufficient information.
7. What is the magnitude of monopsonistic exploitation?
(a) $0.75
(b) $1.75
(c) $2.50
(d) can’t tell; insufficient information.
8. Which of the following statement(s) is(are) true?
(a) The agricultural sector is quite sensitive to interest rates.
(b) The slope of the planned investment function is the MIS.
(c) The slope of the saving function is the MPS.
(d) (a) and (c).
9. The Capper-Volstead Act of 1922:
(a) reinforced anti-trust laws regarding livestock marketing.
(b) was principal legislation exempting cooperatives from anti-trust laws.
(c) plugged loopholes in the Sherman Anti-trust Act and created the Federal Trade Commission.
(d) none of the above.
Agec 105, Exam 3, Page 3
10. The current loan rate for this commodity is $2.94/bushel, and the current target price for this
commodity is $4.17/bushel. The commodity is:
(a) soybeans
(b) wheat
(c) corn
(d) sorghum
11. In the diagram below, suppose the government imposes a price ceiling of $27. The total revenue the
monopolist will accrue is:
P
MC
($/unit)
ATC
30
AVC
27
25
20
18
MR
50 55 60
(a) $1,350
(b) $1,500
D
Units
(c) $1,620
(d) can’t tell; insufficient information.
12. Which of the following does not describe the real roots of the farm problem?
(a) fixity of farm assets
(b) lack of market power by agricultural producers
(c) interest sensitivity of the agricultural sector.
(d) own-price elasticity of demand for farm products is elastic
13. Which of the following target prices is correct?
(a) corn: $1.95/bushel
(c) soybeans: $5.00/bushel
(b) cotton: $0.7125/pound
(d) rice: $6.50/cwt (hundredweight)
14. Which of the following acts marked the beginning of the long history of government intervention in
the agricultural sector?
(a) Clayton Act of 1914
(b) Capper-Volstead Act of 1922
(c) Agricultural Adjustment Act of 1933
(d) Agricultural Marketing Agreement Act of 1937
Agec 105, Exam 3, Page 4
15. According to the philosopher Thomas Malthus,
(a) the population grows at a geometric rate, but food production grows at an arithmetic rate. Thus,
the time eventually will come when it is impossible to feed the world.
(b) the population grows at an arithmetic rate, but food production grows at an geometric rate.
Consequently, there will never come a time when it is impossible to feed the world.
(c) government intervention in the agricultural sector is undesirable politically.
(d) none of the above.
16. The government agency within the U.S. Department of Agriculture (USDA) that makes nonrecourse
loans to farmers for the purpose of supporting prices at a specified level is the
(a) Food and Drug Administration
(b) Federal Trade Commission
(c) Commodity Credit Corporation
(d) National Resource Conservation Service
17. On economic grounds, U.S. cotton farmers should not support legislation to:
(a) continue with NAFTA (North American Free Trade Agreement)
(b) terminate the Conservation Reserve Program.
(c) terminate the commodity checkoff program for cotton.
(d) (b) and (c)
18. The rationale for government intervention into the agricultural sector typically includes:
(a) providing for environmental quality.
(b) providing for national food security.
(c) providing for consumer health and safety.
(d) all of the above.
19. Which of the following is (are) included in GDP?
(a) the purchase of farmland
(b) expenditures associated with illegal activities.
(c) expenditures for fire and police protection.
(d) both (a) and (c).
20. Which of the following statement(s) is (are) true?
(a) Money serves a variety of roles including a medium of exchange, a unit of accounting, and a
store of value.
(b) The Federal Reserve System began operations in 1914.
(c) The number of Federal Reserve Bank Districts is 12.
(d) all of the above.
21. Which of the following statement(s) is (are) true?
(a) The Department of Commerce collects data about GDP and its components.
(b) Consumption expenditures represent about 70 percent of GDP.
(c) Net exports for the U.S. economy currently are negative.
(d) All of the above.
Agec 105, Exam 3, Page 5
22. The most volatile component of GDP (that is, the component that fluctuates the most) is:
(a) consumption expenditures
(b) gross private domestic investment
(c) government expenditures
(d) net exports
23. Assume that the own-price elasticity of domestic demand for corn is -.4 and that the own-price
elasticity of foreign demand is -1.6. Also, suppose that the market share for domestic use of corn is
80 percent. What is the own-price elasticity of total demand?
(a) -.64
(b) -1.00
(c) -1.36
(d) can’t tell; insufficient information.
24. In the following graph, the rightward shift in the planned investment function may be attributed to:
(a) a drop in interest rates.
(b) a sharp increase in the tax rate to corporations.
(c) an optimistic view of profit expectations.
(d) both (a) and (c).
I0
I1
25. Which of the following statement(s) is (are) true?
(a) Fiscal policy refers to changes in taxes and government expenditures.
(b) Agricultural checkoff programs, if successful, are demand expansion programs.
(c) A goal of macroeconomic policy is to eliminate inflationary or recessionary gaps when they
occur.
(d) All of the above.
26. Which of the following is not a factor affecting the consumption function?
(a) interest rates
(b) taxes
(c) technology
(d) wealth
Agec 105, Exam 3, Page 6
27. The information below pertains to agricultural prices for a particular commodity.
Loan rate
Target Price
Market Price
$3.50 per bushel
$3.75 per bushel
$3.00 per bushel
According to this information, what is the deficiency payment per bushel for this commodity?
(a) $0.00
(b) $0.25
(c) $0.50
(d) $0.75
28. Which of the following statement(s) is (are) true?
(a) All banks are members of the Federal Reserve System.
(b) The name of the entity composed of the Board of Governors and five presidents of Federal
Reserve Banks is the Federal Open Market Committee.
(c) The interest rate the Federal Reserve System charges its member bank is called the discount rate.
(d) (b) and (c).
29. Which of the following statement(s) is(are) true?
(a) The own-price elasticity of domestic demand for agricultural products is inelastic.
(b) The supply curve, in the short run, for agricultural products is inelastic.
(c) The own-price elasticity of foreign demand for agricultural products is larger (in absolute
value) than the own-price elasticity of domestic demand for agricultural products.
(d) all of the above.
30. If a farmer could exchange a bale of cotton for a pair of overalls in 1910-1914, he should be able to
make the same exchange today. This concept is known as:
(a) asset fixity
(b) parity
(c) the treadmill problem
(d) none of the above
Questions 31 to 33 pertain to the following diagram for a particular agricultural commodity.
P ($/lb.)
S
$2.75
$2.50
D
200
240 270
Q (millions of lbs.)
Agec 105, Exam 3, Page 7
31. What is the magnitude of the surplus for this commodity if the price is $2.75 per pound?
(a) zero million pounds
(b) 30 million pounds
(c) 40 million pounds
(d) 70 million pounds
32. This government program will cost taxpayers:
(a) $192.5 million.
(b) $600 million.
(c) $742.5 million.
(d) can’t say; insufficient information..
33. Under this government program, how much will producers receive?
(a) $192.5 million.
(b) $600 million.
(c) $742.5 million.
(d) can’t say; insufficient information.
34. A situation designed to increase or maintain profits through price fixing and/or to restrict new firms
in an industry is called:
(a) countervailing action
(b) collusion
(c) non-price competition
(d) deadweight loss
Questions 35 to 38 pertain to the following information supposedly collected on a particular country by
the CIA.
Consumption Expenditures
Imports
Depreciation
Government Expenditures
Gross Private Domestic Investment
Tax Revenues
Exports
$3,600 million
$1,200 million
$300 million
$1,000 million
$1,000 million
$700 million
$800 million
Implicit GDP Deflator
2.00 (1996 = 1.00)
35. Nominal GDP is equal to:
(a) $4,900 million
(b) $5,200 million
(c) $5,600 million
(d) $6,000 million
Agec 105, Exam 3, Page 8
36. Which of the following statement(s) is(are) true?
(a) This country is a net exporting nation.
(b) This country is a net importing nation.
(c) Nominal NNP is nominal GDP less $300 million.
(d) (b) and (c).
37. Which of the following statements is true?
(a) This country is incurring a deficit of $300 million.
(b) This country is incurring a surplus of $300 million.
(c) This country is experiencing a balanced budget.
(d) can’t tell; insufficient information.
38. Real per capita GDP is equal to:
(a) $5,200 million
(b) $2,600 million
(c) $2,450 million
(d) can’t tell; insufficient information.
Questions 39 to 41 pertain to the graph below.
P
S
PTD
PDD
4
2
6
5
3
1
7
8
TD
9
DD
39. The diagram above describes what kind of agricultural program?
(a) Set Aside
(b) Domestic Demand Expansion
(c) Conservation Reserve Program
(d) Expanding Export Demand
40. The change in producer surplus is given by area(s):
(a) 5 - 2
(b) 2 + 3
(c) - 2 - 3
(d) - 2
41. The change in domestic consumer surplus is given by area(s):
(a) 5 - 2
(b) 2 + 3
(c) - 2 - 3
(d) - 2
Agec 105, Exam 3, Page 9
Questions 42 to 45 pertain to the following diagram.
D
P (general level)
AS
2.00
C
AD
1.50
1.40
A
B
12 14
20
Q (trillion)
Assume the curves depict the aggregate demand (AD) and aggregate supply (AS) curves for a
particular economy. Let $14 trillion correspond to the full employment level of aggregate output
(the targeted or desired level) for this particular economy.
42. This economy is:
(a) experiencing an inflationary gap of $2 trillion.
(b) experiencing an recessionary gap of $2 trillion.
(c) experiencing an recessionary gap of $6 trillion.
(d) experiencing an inflationary gap of $6 trillion.
43. To eliminate the gap described in the previous question:
(a) the tax rate should be lowered.
(b) government expenditures should be lowered.
(c) interest rates should be lowered.
(d) (a) and (c)
44. Which of the following statement(s) is(are) true:
(a) The depression range of the aggregate supply curve is given by CD.
(b)The potential GDP for the country is $20 trillion.
(c) The classical range of the aggregate supply curve is given by AB.
(d) All of the above.
45. The price level in the above diagram corresponds to the implicit GDP price deflator. What is the
inflation rate as we move from a $12 trillion GDP to a $14 trillion GDP?
(a) 6.67 percent
(b) 7.14 percent
(c) 10 percent
(d) can’t tell; insufficient information.
Agec 105, Exam 3, Page 10
Questions 46 and 47 pertain to the following information.
Personal Income
DPI
Consumption Expenditures
Planned
Investment
Interest Rates
$100,000
$75,000
$60,000
$50,000
6%
$140,000
$105,000
$80,000
$80,000
4%
46. Which of the following is true?
(a) when DPI = $75,000, taxes = $25,000.
(b) the MPC = 2/3.
(c) when DPI =$105,000, savings = $25,000.
(d) all of the above.
47. The MIS (marginal interest sensitivity) is equal to:
(a) -$15,000.
(b) $15,000.
(c) -$30,000.
(d) can’t tell; insufficient information.
48. Which of the following statement(s) is (are) true?
(a) Farm conditions in the United States would be improved if the U.S. were to continue trade
relations with China.
(b) The concept of target prices was first proposed by Secretary of Agriculture Charles Brannan in
1949.
(c) A marketing quota corresponds to a supply management program.
(d) all of the above.
49. Which of the following statement(s) is (are) true?
(a) Farm conditions in the United States would be improved if the U.S. were to discontinue all
supplemental food programs.
(b) Net exports can never be negative.
(c) John Maynard Keynes is credited with the development of the consumption function as well as
the notion of aggregate demand.
(d) (a) and (c).
50. Which of the following program(s) is(are) concerned about demand expansion?
(a) Supplemental Nutritional Assistance Program
(b) School Breakfast Program
(c) CRP
(d) (a) and (b)
Agec 105, Exam 3, Page 11