Which of the following best describes the short-run problem faced by farms?
A. New technology has increased the productivity of farmers and therefore resulted in
declining farm prices and low farm incomes.
B. The highly inelastic nature of agricultural demand, together with fluctuations in exports of
farm goods, has caused small year-to-year fluctuations in farm output to result in highly
unstable farm incomes.
C. The supply of farm products has increased relative to the demand for them, and because
demand is inelastic, prices of farm output and farm income have therefore declined.
D. The demand for farm products has increased relative to their supply, but the elastic nature
of agricultural demand has caused these shifts to result in declining farm incomes.
Answer: B
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Which of the following is a problem inherent in centrally planned economies?
A) There are no problems and everyone, including consumers, is satisfied. B) There is too much production of low-cost, high-quality goods and services. C) Production managers are more concerned with satisfying government's orders than with satisfying consumer wants. D) Unemployment is too high.
The following input-requirements data are for Country A, a capital-abundant country that produces nothing but bread and wine using only capital and labor as inputs. 1 Pound of Bread1 Gallon of WineCapital Input5 units2 unitsLabor Input4 units1 unit Which of the following is most likely to happen if Country A engages in free trade with other countries?
A. The prices of both bread and wine will fall in the domestic market. B. The price of bread will rise but the price of wine will fall in the domestic market. C. The price of bread will fall but the price of wine will rise in the domestic market. D. The prices of both bread and wine will rise in the domestic market.