7.3 Price Supports in Agriculture
1) The methods that governments use to support farmers vary, but they almost always involve some or all the following methods EXCEPT
A) pay farmers a subsidy.
B) introduce a price floor.
C) isolate the domestic market from global competition.
D) tax farmers.
E) use price supports.
2) A price floor in an agricultural market is called
A) an agricultural floor.
B) a farm support.
C) a price support.
D) a farm subsidy.
E) a farm support price.
3) Which of the following is true regarding a price support set above the equilibrium price?
i.The price support increases the price consumers pay.
ii.The price support creates a deadweight loss.
iii.The price support decreases output.
A) i and ii
B) i and iii
C) iii only
D) i, ii, and iii
E) i only
4) In a crop market with a price support above the equilibrium price, the total amount of the subsidy paid to farmers is equal to the
A) quantity of the surplus crop multiplied by the support price.
B) quantity of the crop produced multiplied by the support price.
C) quantity of the crop purchased by domestic users multiplied by the support price.
D) quantity of the surplus crop multiplied by the equilibrium price.
E) quantity of the crop purchased by domestic users multiplied by the equilibrium price.
5) In the market for cotton, suppose the equilibrium price is $10 per ton and the equilibrium quantity is 100 tons. If the government then imposes a price support of $20 per ton,
A) the market price increases.
B) the market price decreases.
C) marginal cost decreases.
D) consumer surplus increases.
E) the deadweight loss is decreased.
6) When a price support is set below the equilibrium price, producers ________ the quantity supplied and consumers ________ the quantity demanded.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) do not change; do not change
7) Setting a price support in the market for sugar beets above equilibrium price ________ the quantity produced and ________ the quantity bought by consumers.
A) decreases; decreases
B) increases; decreases
C) decreases; increases
D) increases; increases
E) does not change; increases
8) A price support leads to inefficiency because
A) output is more than the efficient, equilibrium quantity.
B) the marginal benefit of the last unit produced is larger than the marginal cost.
C) the price charged is less than the equilibrium price.
D) producer surplus is less than consumer surplus.
E) producers must pay a subsidy to the government.
9) Suppose the government imposes a price support that is above the equilibrium price. As a result,
A) total revenue increases.
B) consumer surplus increases.
C) the marginal cost of the last unit produced decreases.
D) the government has effectively imposed a price ceiling.
E) the subsidy the government pays decreases.
10) A market with a price support set above the equilibrium price,
A) consumers gain.
B) taxes on consumers decrease.
C) marginal benefit exceeds marginal cost.
D) is efficient.
E) farmers gain.
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