AGEC 429 FINAL Flashcards
1
Q
- Why does Texas’ influence in D.C continue to increase? Why might a Member of Congress prefer to serve in the Senate rather than the U.S House of Representatives?
A
- Increasing population (House of Representatives)
- A member of Senate has 6-year term cycle
- 2-year terms are not enough
2
Q
- What are three functions of Congress? Which function does the House of Agriculture Committee serve?
A
- Authorization
- Appropriation
- Oversight
The house agriculture committee serves an authorization / authorization function
3
Q
- Name a general farm organization. What interest groups tend to be the most effective – general farm organizations or commodity groups? Why?
A
- National Farmers Union or American Farm Bureau Federation
- Commodity Groups
- Because they only represent 1 crop that can be more focused than a general farm organization who represent many different commodities
4
Q
- What factors influence a person’s policy position? Under what circumstances would you expect a person’s policy position to change?
A
- Facts values and beliefs (myths in place of beliefs will work too)
- A person’s policy position likely change as facts change (or as they become more informed)
5
Q
- What causes a change in quantity demanded?
- Income
- Population
- Taste and preferences
- Change in own price of the good
- All of the above
A
- Change in own price of the good
6
Q
- Which of the following is NOT true about global farm policy?
- The farm safety net accounts for roughly 25% of the US budget
- The Common Ag Policy (CAP) currently accounts for roughly 35% of the EU budget
- For most of the 20th century, agriculture had chronic excess capacity
- Both A and B
- None of the above
A
- The farm safety net accounts for roughly 25% of the U.S budget
7
Q
- Which of the following is NOT true about policy and programs?
- Programs implement policy
- Policies are guiding principles for action
- It is not important whether the Congress shares the President’s policy vision
- All of the above
- None of the above
A
- It is not important whether the Congress shares the President’s policy vision
8
Q
- How can a member of Congress avoid the law of intended consequence?
- Accuse members of the other political party of the bad idea
- Have their proposal evaluated and analyzed by a third party
- Never introduce new legislation
- None of the above
A
- Have their proposal evaluated and analyzed by a third party
9
Q
- The benefits of farm programs are captured in the value of cropland. This is an example of:
- Marginal rate of substitution
- Compensation principle
- Capitalization
- None of the above
A
- Capitalization
10
Q
- Which of the following is true about Trade Promotion Authority (TPA)?
- Gives the President the authority to negotiate trade agreements with no oversight by Congress
- Establishes the principal negotiating objective of the US with respect to agriculture
- Both A and C
- None of the above
A
- Establishes the principal negotiating objective of the U.S. with respect to agriculture
11
Q
- Which of the following is true about WTO Boxes?
- Green box policies have large impact on production and trade
- The US has never exceeded its AMS limitation of $19.1 billion
- There are specific limits on blue box policies
- All of the above
- None of the above
A
- The U.S. has never exceeded its AMS limitation of $19.2 billion
12
Q
- Assume the U.S spent $3.5 billion of product-specific support for U.S. corn producers in 2020. The value of the corn crop in 2020 was $60 billion. How much of the $3.5 billion in support must the U.S. count against its $19.1 billion AMS limit?
- $0
- $0.5 billion
- $3.0 billion
- $3.5 billion
- None of the above
A
- $3.5 billion
13
Q
- Who are the main players in agriculture’s iron triangle?
A
- Interest Groups
- USDA
- Legislative Branch
14
Q
- Why is it so important to understand how policy is made?
A
- Political Influence
- Influence Political Outcomes
For if you want to know how to influence policy and or political outcomes
15
Q
- Evaluate this statement: International trade is important to agriculture. Say whether you agree or disagree and provide support for your answer
A
- Agree
- U.S. exports more than 75% of cotton crop,
- U.S. exports roughly 11% of beef,
- Export more than 20% of ag production
16
Q
- South Texas Cotton and Grain is a relatively small farm organization representing most of the producers in the Coastal Bend of Texas. What can they do to become more influential in Washington, D.C.? What is this an example of?
A
- Politics of the Minority
- Small groups can join together with other groups who believe the same way on an issue.
17
Q
- The elasticity of demand for agricultural commodities is -0.4, and the elasticity of supply is 0.6. What do each of these numbers mean, and how are they related to the issue of variable farm income?
A
- 0.45 (inelastic demand)
- 0.6 (elastic supply)
- Supply and demand for ag commodities are both inelastic
- leads to income variability
- farm income = price x yield
18
Q
18. Aggieville, Texas. Cost of ingredients had gone up $2 for every bag sold. Increase price of feed from $15 to $18 Mil sells 1,000 bags a week Own-price elasticity for demand is -0.5 What is new quantity demanded?
A
% △PY = (18-15)/15*100 = 20%
- 0.5 = % △QY / % △PY
- 0.5 = % △QY / 20%
% △QY = -0.5*20% = -10%
△QY = 1,000*-10% = -100
New QY = 1,000 – 100 = 900
Initial revenue = 15 x 1000 = 15,000
New revenue = 18 x 900 = 16,200
Change in revenue = 1,200
Additional cost = 900 x 2 = 1800
19
Q
- Cross-price elasticity is 0.9
Price increase from $15 to $18 per bag
Mill sells 500 bags a week
What is the new quantity demanded?
A
% △PY = (18-15)/15 *100 = 20%
- 9 = % △QZ / % △PY
- 9 = % △QZ / 20%
% △QZ = 0.9*20% = 18%
△QZ = 500*18% = 90
New QZ = 500+90 = 590
- Substitutes
- Because the cross-price elasticity is positive.
20
Q
- Answer the following question as it related to corn payments in the 2002 Farm Bill assuming:
The target price is $4.00/bu.
The marketing loan rate is $2.50/bu.
The direct payment rate is $0.5/bu.
Market price for corn of $3.50/bu.
If the market price decreases by $1.10/bu. To $2.40/bu., what would be the impact on counter-cyclical payments, direct payments, and marketing loan gains/loan deficiency payments?
A
- CCP – goes from $0 to $1.00
- DPs – stays at $0.50
- MLG/LDP – goes from $0 to $0.10
21
Q
- Why would U.S. international competitors prefer the nonrecourse loan more than the nonrecourse marketing loan?
A
- The marketing loan removes price floor, allows price to fall and market clear.
- International competitors do not like the US allowing price to fall as it makes us more competitive.
22
Q
- What is the significance of the 1949 Agricultural Adjustment Act to modern day ag policy?
A
- It is permanent legislation (last bill to be passed without an expiration date)
- The provisions of the 1949 act would cost the government too much if a new bill is not enacted (such as parity prices)
23
Q
- For the following policy tools, list the farm bill(s) the tools are associated with and say whether they are coupled or decoupled. If coupled indicate where.
A
MLG – 1990, 1996, 2002, 2008 – coupled – prices and production
AMTA – 1996, 2002, 2008 – decoupled
ACRE – 2008 – coupled – price
CCPs – 2002, 2008 – coupled – price
TP – 1990 – coupled – prices and production
24
Q
- Under the 1990 Farm Bill, the carrot and stick approach were used. What were the carrot and stick that were used and why were they used?
A
- Carrot – deficiency payments
- Stick – ARPs (acreage reduction program)
- They were used to provide a safety net while allowing the USDA to manage supplied and demand.
- (pay less in deficiency payments)
25
Q
- Under the 1990 Farm Bill, if the ARP for rice is announced at 8% but production only declined 4%, what happened? Why?
A
Because of slippage the reduction in production is less than the reduction in base acres allowed to be planted
This results from:
- The poorer land being taken out of production
- The remaining acres being farmed more intensely
26
Q
- What were the primary reasons the 1996 Farm Bill was called a watershed change in agricultural policy? Why is it considered both a success and a failure?
A
- Tied production decision to government payments and gave planting flexibility.
- Eliminated target prices and deficiency payments and ARPs and retained the marketing loan
- Instituted fully decoupled production flexibility contract payments (PFCs) or also called AMTA payments
- were intended to transition producers over time to receiving less go support
- It was a success because it decoupled payment (income support) form the production decision.
- It was a failure because the fixed payments (PFC or AMTA payments) were not enough support when commodity prices dropped sharply shortly after the bill was complete.
