AEC 305 (Fall 2007) Exam I (25%) Name _________________________________________________ 1.An economist can analyze agricultural markets by using the behavioral, institutional, and functional approaches. Define each approach. How would the term consumer sovereignty apply to the behavioral approach? (5 points) 2.Which one of the following statements is FALSE.? Circle the statement that is false, no need to correct if false. (4 points) a. The farm share of the consumer food dollar has declined over time in response to additional marketing services demanded by consumers. b. Higher farm commodity prices represent a major factor increasing the marketing bill. c. A decline in the farm share of the consumer retail food dollar does not necessarily indicate that farm prices or profitability has declined d. The farmer’s share of food items consumed at home is typically higher than the farmer’s share of food items consumed away from home. 3.Answer the following: a.Distinguish between the marketing bill, farm to retail price spread, and the market basket. (6 points)b.Consumer food expenditures are more than $600 million higher today than they were in the 1970s. Identify three economic reasons why this has occurred. (6 points)c.Look at the table below. Interpret the June 2007 index value for the retail cost and the farm value relative to the base period. (4 points).Farm-Retail Price SpreadsAnnual 200420052006June 2007Market basket Retail cost (1982-84=100) 194.4198.2201.9210.4Farm value (1982-84=100) 124.4122.3120.0139.4Farm value-retail cost (%) 22.421.620.823.2Source: ERS/USDA
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