One of the things that distinguishes agriculture from most other markets is that market level demand and supply are both very inelastic (i.e., not very price responsive). As a result,
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Correct prices in agriculture are very unstable
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The fundamental problem facing U.S. agriculture is
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overproduction
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For a farmer who participates in the corn price support program, a loan rate of $2.25/bushel means that
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the farmer is eligible for a non-recourse loan
the farmer can get $2.25/bu when he stores his grain
the farmer has the option of selling the corn on the cash market at prices above $2.25
the farmer can "sell" his corn to the Commodity Credit Corp. for $2.25/bu even if the cash price is less than $2.25/bu
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Which of the following is NOT accomplished by the marketing assistance loan program?
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assures farmer of a profit on the crop
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The economic impact of the loan program is to
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provide a price floor
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The major problem facing U.S. agriculture is
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the capability to overproduce
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A price support program using price floors will
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create surpluses
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In a typical price support program, the loan rate
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establishes a market price floor
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The primary beneficiaries of our price support programs are ________ farms and ________ consumers.
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large; poor
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Under the loan program, if the market price of a covered commodity falls below the loan rate, the government
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pays farmers the difference between the market price and the loan rate
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Agriculture is characterized by extreme price variability caused by
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the fact that both supply and demand curves are very inelastic
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While the loan program solves some problems, it creates another problem. What is it?
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surplus disposal
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U.S. agricultural policy includes a loan program that creates ________, which causes ________.
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a price floor; surpluses
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The loan program is the policy used to
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establish a minimum price
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In the United States we have no direct price support programs for the producers of
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cattle
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The primary purpose of the loan program component of price support programs is to
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avoid having to sell at harvest
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The 1996 farm bill eliminated
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production controls
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In the United States we have had some form of federal price/income support for farmers since
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1933
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There is no price support program for
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pork
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U.S. agricultural prices are subject to substantial price variability because demand is very ________ and supply is very ________.
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inelastic; inelastic
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The price support programs in American agriculture were instituted
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during the Roosevelt "New Deal"
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________ demand is derived from ________ demand by ________ the marketing margin.
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Farm; retail; subtracting
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Because farm level demand and supply are more ________ than at retail, there is ________ price variability at the farm level that at the retail level.
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inelastic; greater
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Marketing involves change in
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place
form
utility
time
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An improvement in a marketing system that makes it more efficient results in ________ prices for the consumer, ________ prices for the producer, and ________ quantity traded.
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lower; higher; higher
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Prices fluctuate more at the farm level than at retail. Why?
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Supply and demand are more inelastic at the farm level than at retail.
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A reduction in marketing margins means
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consumers get lower prices
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The demand for beef is most elastic at the
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retail level
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The marketing margin is
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the difference between prices at different market levels
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Which good has the highest farm share of retail food prices?
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eggs
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Sam just bought $100 of groceries at the local Wal-Mart. The farm value of what he just purchased is approximately
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$19
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Which of the following faces the most inelastic demand?
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wheat farmer
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Farm value as a percent of food expenditures is
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19%
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A consumer product with a very low proportion of marketing costs relative to total cost is
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eggs
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The difference between the farm level price of a product and the retail price is
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the marketing margin
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Farm level demand
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is more inelastic than retail demand
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Of every $100 spent by Americans on food, roughly ________ is spent on marketing and ________ represents the farm value of the food.
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$81; $19
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Retail level prices are ________ volatile than farm level prices because retail level demand elasticity is more ________ than farm level elasticity.
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less; elastic
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The value added by farmers in $100 of retail food is approximately ________. The rest is added by the marketing system for inputs purchased by the farmer or by the post-farm marketing system.
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$7
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Increased efficiency in the marketing system will
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help the farmer and the consumer
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In a multi-level marketing model with both a farm level and a retail level, the intersection of the derived demand curve and the derived supply curve determines
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nothing
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Which of the following is a significant source of long-term credit for U.S. agriculture, but is NOT a source for short-term credit?
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insurance companies
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As a result of the creation of the Federal Agricultural Mortgage Corporation, which of the following became more active in making long-term loans to farmers?
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rural banks
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Which of the following is NOT true about the Funding Corporation of the Farm Credit Service?
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It is the largest borrower on Wall Street.
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Which of the following deals exclusively with farm mortgages?
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Farmer Mac
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The Farm Credit System gets the money it lends out to farmers from
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none of the above
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Which of the following is NOT a cooperative?
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Kraft
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Which of true of a franchise agent in a given area?
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becomes a local monopoly of a particular company's merchandies
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Agricultural cooperatives allow farmers to
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gain bargaining power
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A patronage refund
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is proportional to the amount of business the member does with a cooperative
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Which of the following do not typically provide short-term credit to farmers?
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insurance companies
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Profits of an agricultural cooperative
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are distributed to members on the basis of patronage
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A farmer seeking the "lender of last resort" would go to
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Farm Service Agency
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A unique feature of agricultural cooperatives is
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Profits of a cooperative corporation are returned to the owners of the coop on the basis of
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The Farm Credit Service Funding Corp.
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sells bonds on Wall Street
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How many regional banks collectively own the FCS Funding Corporation?
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4
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The Farm Credit Service is a good example of
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vertical and hortzontal integration
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