Suppose a farmer raising beef is making a normal profit. Then, because of a scare about mad cow disease, the demand for beef decreases drastically. What happens to the profits of the beef farmer in the short run and in the long run?
What will be an ideal response?
In the short run, the fall in beef prices will decrease the farmer's profits. With the fall in price, the farmer will incur an economic loss. If the price is high enough so the revenue covers the farmer's variable costs, the farmer will continue to operate. In the long run, if demand continues to remain depressed, some farmers will exit the market until the remaining farmers earn a normal profit once again.
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Refer to the figure above. If the exchange rate is fixed above E yuan per dollar:
A) both the yuan and dollar are undervalued. B) the dollar is overvalued and the yuan is undervalued. C) both the yuan and dollar are overvalued. D) the dollar is undervalued and the yuan is overvalued.
Which of the following statements is true of sharecropping?
a. It is an inefficient arrangement if the work of the farmer is not monitored. b. The higher the profit to the landowner, the higher the share of the farmer. c. Both the farmer and the landowner will work to maximize farm profits. d. The higher the profit to the landowner, the lower the share of the farmer.