AEC 305 Exam 1 Review Questions

Demand elasticities for food tend to be ________________________. This is because consumers (especially in the U.S.) respond relatively little to changes in food prices, ceteris paribus.
low
The fact that agricultural marketing involves input suppliers, farm production, brokering, processing, storage, wholesaling, and retailing is a sign that it is ________________________.
Multistage
Farm-level corn prices in the U.S. are the same and do not change based on how difficult or easy it is for brokers to distribute this product. (T/F)
False
Why would a global market for fresh watermelon likely be a very small or non-existent market?
Watermelons are expensive to transport relative to their value.
Different markets along the marketing supply chain (e.g., farm-level versus wholesale versus retail market) are typically defined by the __________________.
seller (e.g., farm-level markets have farmers as sellers)
The same process that is used to create an index is used to rescale an index. (T/F)
True
When calculating percent change (i.e., calculating a “share” of something), the “from” value is the “old” value and the “to” value is the “new” value. For instance, calculate the percent change in population from 1960 (value = 180 million) to 2010 (value = 309 million). For this question, you would use the formula “new minus old divided by old”. So, (309 – 180) / 180 times 100 or 71.66. (T/F)
True
The single largest industry sector comprising all U.S. food expenditures in 2011 is
food service
In the U.S., consumers annually spent on average about __________________ on food per capita in 2010?
$4000
An increase in the overall price level is also known as __________________ (one word).
inflation
In the U.S., the U.S.D.A. recognizes ____________ grades for eggs.
3
Which of the following government interventions seeks to moderate market supplies of agricultural commodities directly?
Production controls
Only 1.031 pounds of fresh carrots are needed at the farm level to yield 1 pound of fresh carrots at the retail level. Why is the conversion factor for carrots so low?
Fresh carrots do not spoil or damage easily
The fact that U.S. consumers increasingly want fresher, more nutritious, and visually more appealing food products is one reason that the U.S. food marketing bill is increasing. (T/F)
True
GMO stands for “genetically modified organisms” (e.g., Round Up(R) ready soybeans). (T/F)
True
When defining agricultural markets, the choice of space depends on the particular ways that the good or service is ______________________.
distributed
Markets are comprised of three elements: buyers, sellers, and ____________________ (one word).
organization
In the U.S., about _______________ percent of all laborers are farmers.
less than 2%
Market characteristics should be ones that consumers “recognize”. In this context, the word “recognize” means:
to value
Marketing adds value by enhancing the location, form, or ___________________ of goods or services (one word).
possession
In 2010, U.S. consumers spent on average about _____________ percent of their disposable income on food.
11
Real values are equal to ______________________.
the nominal value divided by the price index value times 100
Food in general is a normal good. When consumer incomes increase, the quantity demanded of any particular normal good increases, ceteris paribus. This implies that the income elasticity for food is ______________________.
postive
Calculate the percent change in real per capita food expenditures from 1960 to 2010 using Table 1 in this lesson. Enter only the number.
33.4 (with margin:0)
Farm value share is calculated by dividing __________________________ (two words) by the total consumer food expenditures and then multiplying by 100.
farm value
The marketing costs associated with individual food products or limited groups of food products are described by farm-to-retail ____________________ (two words).
price spread
Commodities accumulated under U.S. nonrecourse loan programs are NOT distributed to which of the following?
Brokers and dealers on spot market exchanges
Retail price minus farm value equivalent equals farm-to-retail price spread. (T/F)
True
Why have farm value shares (i.e., the share of the retail price that goes to pay farmers) been decreasing for individual food products and limited groups of products?
Consumers are demanding more processed and highly packaged foods
When calculating disappearance, XT refers to exports during this time period. (T/F)
True
A yard sale is an example of a market. (T/F)
True
A person who buys thoroughbred horses solely for racing likely does not “recognize” the color of these horses since color has never been proven to affect the speed of horses. (T/F)
True
According to your text, why do international development agencies (e.g., USAID) often hire agricultural economists?
Because developing countries tend to have more agricultural related workers and GDP.
In the U.S., farming accounts for approximately what percent of Gross Domestic Product (GDP)?
1%
According to the Big Mac Index (2013), a Big Mac cost approximately how much more or less as a percent in Norway than in the United States.
about 62 percent more
Total consumer food expenditures are comprised of two components. One of these components describes the costs to get all U.S. produced food from all the farm gates into the hands of final consumers. This component is called the _______________________________ (two words).
marketing bill
Since 1960, aggregate nominal income in the U.S. has ___________________.
increased
Given the following information for 2010 in nominal values, calculate nominal Farm Value Share.

Farm Value: 176.9 billion dollars

Marketing Bill: 1073.8 billion dollars

Consumer Food Expenditures: 1,250.7 billion dollars

Population: 309 million

Income: 11,379.9 billion dollars

CPI: 218.1

14.25 (Between 14.0 and 14.25)
The USDA estimates that 2.4 pounds of steer and 1.042 pounds of potatoes are required to yield one pound of each of these products at the retail level. What best explains why the conversion factor for beef is higher than for potatoes?
Beef requires more processing and higher cost inputs to grow than potatoes
One important reason that the U.S. food marketing bill has increased rapidly in recent decades is changing consumer preferences (e.g., for more processed meals). (T/F)
True
Agricultural marketing is a multidisciplinary field of study that includes many different kinds of laborers in addition to farmers. Other groups of jobs related to agricultural marketing include truckers, factory workers, lawyers, accountants, and psychologists. According to your text, another job group related to agricultural marketing is ________________________ (one word). Note: multiple correct answers. Be sure your answer completes the sentence in a grammatically correct way.
Artists
Soil scientists
economist
Planners
Grocers
chef
planner
artist
Geographers
Engineers
geographer
grocer
Psychologists
Chefs
trader
Traders
psychologist
Economists
engineer
soil scientist
A “pick your own” fruit or vegetable market is most likely a ____________ market.
local
The incomes of nearly half the world’s population are determined principally by the prices received for agricultural commodities (e.g., maize, sorghum, cassava, rice, potatoes, etc.). (T/F)
True
If total annual U.S. consumer food expenditures were $1,300 billion and if the U.S. farm value for that same year was $200 billion, the total U.S. food marketing bill for that year was _____________ billion?
$1100 billion
When talking about indices in the U.S., CPI stands for Consumer Price Index. (T/F)
True
Unambiguous descriptions of products that allow easy categorization of individual units by buyers and sellers based on relevant criteria for the purposes of trade are called ___________________ (two words).
grade standards
When calculating disappearance, BST+1 refers to beginning stocks next period or to ending stocks this period. (T/F)
True
Farm-to-retail price spreads are calculated as the difference between the average food store price and the farm value equivalent quantity of raw food materials. (T/F)
True
Which of the following are not reasons that individual firms are creating and using their own, private standards rather than government-defined standards?
none of these (i.e., all of these are reasons for this trend)
(options were: To create a reputation of greater quality assurance among consumers compared to rival firms; to raise transactions costs and entry barriers for potential competitors; To penetrate and/or develop niche markets earlier, more easily, and at lower cost )
All agricultural products go through the same marketing chain (e.g., farmer to processor to wholesaler to retailer to end consumer). (T/F)
False
Two agricultural economists debated about the marketing chain for cheese. Mr. Green said that the marketing chain consisted of all seven of the major agricultural marketing sectors. Ms. Blue said that it included fewer sectors. Who is right?
Both
The answer is both. The agricultural marketing chain can be longer and involve many different sectors (e.g., farmers, processors, wholesalers, retailers, and final consumers) or the chain can be much shorter (e.g., farmer and final consumers). Bulk producers tend to focus on efficiency and therefore utilize many of the marketing chain levels. Smaller, niche producers (e.g., farm-direct producers) often utilize fewer levels of the chain.
Agricultural markets should be defined clearly in order to avoid unnecessary ___________________________.
argument and confusion
Using the calculator that you use will on the exam, calculate what 123 billion is divided by 456 million. (NOTE: Many basic calculators aren’t able to perform this calculation directly. This question seeks to make sure that you remember how to move the decimal points.)
270
For an index, the value in the base period is always 100 or sometimes it can be 1 if the index ranges from 0 to 1 instead of 1 to 100. (T/F)
True
The single largest industry sector comprising all U.S. food expenditures in 2011 is ___________________.
food services
In lower income countries (e.g., Nigeria), consumers tend to spend a higher percentage of their disposable income on food. (T/F)
True
In the U.S., the U.S.D.A. recognizes ____________ grades for beef.
8
According to the supply/use identity, total supply should equal total use for a given period of time. (T/F)
True
According to the USDA Economic Research Service, how many pounds of hog at the farm level are needed to yield one pound of pork at the retail level?
1.869
Commodities accumulated under U.S. nonrecourse loan programs are distributed via non-competing channels mostly as free or subsidized food aid. Why does the government not sell the commodity back into traditional marketing channels (e.g., using spot markets)?
Doing so would only push agricultural commodity prices lower
In most low income countries, the agricultural sector is relatively ____________________ as a percent of overall GDP.
large
In the summer of 2008, retail gasoline prices in the central Kentucky market area were ________________________ compared to retail gasoline prices in other U.S. retail markets.
nearly the same
Most agricultural markets change over time. (T/F)
True
The incomes of nearly half the world’s population are determined principally by the prices received for agricultural commodities (e.g., maize, sorghum, cassava, rice, potatoes, etc.). (T/F)
True
From 1960 to 2010, agricultural productivity increased by approximately _________ percent.
122
Farm Value + Marketing Bill = Total Consumer Food Expenditures. (T/F)
True
Which of the following government interventions is designed to maintain minimum market prices?
Price supports
Agricultural markets in the U.S. are unique because government subsidies tend to be relatively ____________.
low
Farm-level corn prices in the U.S. are the same and do not change based on how difficult or easy it is for brokers to distribute this product. (T/F)
True
Nominal U.S. per capita food expenditures increased 883% from 1960 to 2010 while the increase in real terms was only 33%. (T/F)
True
From 1980 to 2009, U.S. per capita consumption of tree nuts (shelled) more than doubled. (T/F)
True
Nominal prices, also known as “current prices”, are the prices paid at the time of purchase. (T/F)
True
Which of the following are not current trends with respect to commodity grade standards?
They are increasingly focused on outcome-based rather than process-based standards (other choices: They are increasingly firm-specific with private firms using their own standards rather than government-defined standards; They are increasingly used as strategic marketing tools to aid product differentiation)
Some firms along the agricultural marketing chain transform raw agricultural products into other forms by adding desirable or removing undesirable characteristics (e.g., transforming wheat into bread or corn into corn syrup). These firms are collectively known as _______________________ (one word).
processors
The U.S. Consumer Price Index (CPI) weighs the food and beverage portion of overall consumer expenditures at ____________ percent. (Note: Enter only the number.)
17.4
Two reasons that the U.S. food marketing bill has increased in recent decades are higher disposable incomes and higher total population. (T/F)
True
Calculate real per capita income in 2005 (1982-1984 = 100) given the following information:
16100 (between 16000 and 16100)
Which of the following types of products utilize and depend upon standards most?
Agricultural products
The fact that U.S. consumers increasingly want fresher, more nutritious, and visually more appealing food products is one reason that the U.S. food marketing bill is increasing (T/F)
True
Production lags suggest that supply elasticities in agricultural tend to be relatively _________________.
Low (i.e., inelastic)
The farm value share is that portion (or share) of total consumer food expenditures that go to farmers. (T/F)
True
An ____________ allows for an easy percent comparison between a base period/unit and all other periods/units.
index
Prices that have been adjusted for the effects of inflation are called ___________ prices.
real
From 1960 to 2010, population in the U.S. increased ____________ percent.
70.28
In the United States, tomato grows use video cameras and computers to automatically size tomatoes before they are packaged and sent to stores. (T/F)
True
Suppose two goods, X and Y, have farm value shares equal to 0.03 and 0.62, respectively. If farm level costs increase 20% for each of these goods, retail prices will increase most for which good, X or Y?
Y
Which of the following government interventions seeks to moderate market supplies of agricultural commodities?
The tobacco quota program prior to the 1998 buyout
Grade standards generally have two requirements. One, they must based on measurable attributes, and two they must be __________________.
based on attributes that are recognized (i.e., valued) by consumers
Most retail markets are _______________________ markets.
local
Markets should be defined characteristically in time and _________________.
space
Engel’s Law states that, as incomes rise, consumers tend to spend less money (i.e., fewer dollars) on food. (T/F)
False
According to this lesson’s lecture, the nominal price of one gallon of gasoline in 1913 was __________________ cents.
15
The Latin phrase that means “all else held constant” or “given no other changes” is _________________________ (two words).
ceteris paribus
Once approved, marketing orders are different from grade standards in that the former are required. (T/F)
True
Marketing orders may become binding on all firms in a given market area if at least _____________________ of producers by volume in that area approve the orders.
two-thirds
The fact that agricultural products can be marketed via auctions, futures markets, contracts, marketing boards, cooperatives, or direct negotiations is an indication that agricultural marketing is ___________________________ (one word).
adaptable
The stage of the marketing chain is often (but not always) a relevant market characteristic in agriculture. For example, while agricultural products (e.g., potatoes) move through an extended supply chain from farmers to retailers, many agricultural services (e.g., equine surgery) do not. (T/F)
True
In 2010, real total U.S. food expenditures on food (1982-1984 = 100) were ____________ billion dollars. Enter only the number (no dollar sign).
573.5
Farm value varies from farm to farm since the value of any particular farm’s agricultural products at the farm gate varies. (T/F)
False
Since 1955, the U.S. farm value share has generally _____________________.
been decreasing
While grade standards can allow consumers to buy products unseen, they generally do not help lower transactions costs. (T/F)
False
When defining agricultural markets, national political responses (e.g., to foreign disease outbreaks or trade restrictions) may restrict an otherwise larger marketing space. (T/F)
True
Compared to Kentucky, farmland values in Ohio were ________________ in 2008.
38.3 higher
Inflation is an important reason that the U.S. food marketing bill has increased so dramatically since World War II. (T/F)
True
In 2011, total U.S. consumer expenditures on food in nominal terms (i.e., not adjusted for inflation) were approximately _________________.
$1,317.8 billion
Price supports (e.g., nonrecourse loans) for perishable crops or for major livestock products do not currently exist in the United States. (T/F)
True
One advantage of grade standards is that can help resolve disputes if, for instance, a rogue dealer sent a grocery store owner “U.S. Extra No. 1” carrots that had freeze damage. (T/F)
True
Marketing orders in the U.S. may be approved if a requisite number of growers approve the orders. This requisite number is usually two-thirds __________________.
as measured by the total volume of all products produced and sold in the market area
The attributes used to categorize output using grade standards may relate most generally either to a product s physical characteristics or to how it was _________________.
produced (also generated, made, grown, or raised)
In the U.S., what entity measures disappearance (i.e., commodity consumption)?
None of these (no entity measures disappearance; it is calculated as a residual using other data)
The seven components of the typical agricultural marketing chain include (1) input suppliers, (2) farmers, (3) processors, (4) ____________________, (5) retailers, (6) consumers, and (7) brokers/dealers.
wholesalers
The marketing supply chain describes how an agricultural product (e.g., pork) moves from initial producers (e.g., as shoats or hogs) and eventually on to retailers where the product (e.g., as tenderloin) is sold to the final retail ________________________ (one word).
consumer (or buyer)
Since 1960, the total U.S. food expenditures on food as a share (i.e., percent) of disposable incomes has _________________.
decreased
In addition to agriculture, the two other major sectors of any economy are the industrial sector and the ___________________________ sector, the latter of which comprises about 80% of U.S. gross domestic product.
services
The fact that U.S. imports of food products are ___________________ is a reflection of how globalization within the agricultural marketing is ______________________.
increasing, increasing
Along the agricultural marketing chain, a cruise ship (e.g., that serves meals) is an example of a _______________________ (one word).
retailer
If the retail price for pork is $3.03 per pound and the farm value equivalent is $0.81 per pound, the farm-to-retail price spread for a pound of pork is __________ dollars.
2.22
A _________________ (two words) describes the organization of separate production stages (often different firms) that are involved in getting a particular agricultural product from the farm level to final consumers.
marketing chain
The marketing supply chain describes how an agricultural product (e.g., pork) moves from initial producers (e.g., as shoats or hogs) and eventually on to retailers where the product (e.g., as tenderloin) is sold to the final retail ________________________ (one word).
Individual buyers (or Consumer; Buyers; Consumers; Final consumers; A consumer).
According to Unit 1.3, there are four reasons that the U.S. food marketing bill has increased in recent decades (i.e., Table 4). Those reasons are (1) higher disposable incomes, (2) higher total population, (3) higher overall price level, and (4) ____________________________ (4 words).
changes in consumer tastes
Farm value varies from farm to farm since the value of any particular farm’s agricultural products at the farm gate varies. (T/F)
False
In the U.S., the U.S.D.A. standards for wool are differentiated according to _____________.
fiber diameter
Agricultural markets are unique because government subsidies tend to be relatively very ______________.
high
A quantity index could be used to compare the percent differences in the number of cattle produced across countries. (T/F)
True
Total consumer food expenditures are comprised of two components. One of these components describes the value of all U.S. agricultural products when they leave farms. This component is called _______________ (two words).
farm value
Nominal prices, also known as “current prices”, are the prices paid at the time of purchase. (T/F)
True
In the U.S., the U.S.D.A. recognizes ____________ grades for cotton.
38
One important reason that the U.S. food marketing bill has increased rapidly in recent decades is changing consumer preferences (e.g., for more processed meals). (T/F)
True
Farm value plus marketing bill equals retail price. (T/F)
False
Agricultural markets are relatively unique because they range from the extremes of nearly perfectly competitive to pure monopoly. (T/F)
True
Farm Value + Marketing Bill = Total Consumer Food Expenditures.
True
In economics, ____________________ is defined as output divided by input.
productivity
Almond, kiwifruit, and raisin production in California was subject to marketing orders in 2004-2005. (T/F)
True
In agricultural marketing, another word for “consumption” is _____________
disappearance
Some agricultural products (e.g., fresh tomatoes) may be marketed by farmers directly to consumers or via a more lengthy supply chain involving processors and wholesalers. (T/F)
True
Markets for high-value, low weight agricultural products (e.g., chocolate, spices, and coffee) are typically global because these products can be distributed relatively cheaply. (T/F)
True
The largest component (in terms of weights) in the U.S. Consumer Price Index (CPI) is ________________________ (one word).
housing
Unambiguous descriptions of products that allow easy categorization of individual units by buyers and sellers based on relevant criteria for the purposes of trade are called ___________________ (two words)
grade standards
Grade standards serve two roles: they categorize output and _____________________.
inform consumers
Agricultural marketing is basically about how to convince consumers to purchase one firm’s goods and services rather than a competing firm’s goods and services. (T/F)
False Agricultural marketing is basically about the processes and actors involved in getting agricultural products from the farm to final consumers.
Economists divide economies into three sectors. These sectors are the industrial sector, the agricultural sector, and the ________________ sector.
service
In 2010, total nominal U.S. food expenditures spent on away-from-home food (e.g., at restaurants) were _____________ percent of total U.S. food expenditures spent on all food.
48.9
Since 1960, aggregate real income in the U.S. has _______________.
increased
To meet the “U.S. No. 1” standard for fresh tomatoes, the tomatoes must be almost perfectly smooth. (T/F)
False
Grade standards can be used to categorize food according to how well is prevents cruelty to animals. (T/F)
True
When potato seeds get transformed by farmers into potatoes, this transformation is best identified as a __________________ process.
value add
In order to give market participants more assurance that the prices they agree to are closer to the competitive ideal, governments ______________________.).
gather and distribute information about market transactions
A typical farm-level market for chickens might include chicken farmers selling their chickens to chicken processors. (T/F)
True
One reason that the USDA gathers data about commodity production, imports, exports, etc. is to monitor national food security. (T/F)
True
The fact that U.S. consumers increasingly want fresher, more nutritious, and visually more appealing food products is one reason that the U.S. food marketing bill is increasing.(T/F)