Exam 1 (Questions and Answers)
Approximately what percentage of food expenditures is for food purchased away from home?
50%
Which food product likely has the highest farm share of retail price?
A gallon of milk
Which of the following is the best example of a company adding time value in the market channel for milk in Kroger ice cream?
A refrigerated warehouse that stores the containers of ice cream
Which of the following players would most likely sell a wheat contract for its first move in the futures market?
A speculator who thinks price is going to decrease
Which of the following would not cause a change in the demand for peanut butter?
An increase in the cost of fertilizer
Which of the following is most likely true regarding the supply curve for potatoes?
An increase in the price of pesticides used it potato production will cause a decrease in the supply curve for potatoes A change in the price of potatoes will cause a movement along the supply curve for potatoes, everything else equal The supply curve for potatoes is based on the cost of production of the potato farms
Which of the following is most likely true?
Canada and Mexico are two of our leading agricultural trading partners- they are both in our top 4 import sources and export destinations
Which of the following is most likely true regarding the futures market?
Contracts are traded based on information today about perceptions of the price in the future
An agricultural input supplier would most likely sell...
Equipment, such as combine, to harvest a crop
A producer will always maker more money if he or she hedges than if he or she did not hedge.
False
An increase in elasticity is the same thing as an increase in demand.
False
Assume that the elasticity of demand for Pepsi I s-0.35. Therefore, if the price of Pepsi decreases, then total revenue of Pepsi producers also will increase.
False
If the USDA suddenly announces a major order from China to purchase US soybeans, then it is likely that the cash prices and the futures contract price for soybeans will decrease.
False
If the elasticity of demand for apples is equal to -2.0, then a 10% increase in the price of apples will result in a 5% decrease in the quantity demanded of apples.
False
In general, the more substitutes available for a good, the more inelastic the demand for the good.
False
Most agricultural commodities can be grown anywhere in the world.
False
The cash price is always higher than the future price.
False
The elasticity of demand can be a positive or negative number.
False
The elasticity of demand for most food products is elastic.
False
There are many more hedgers than speculators who trade commodity futures contracts.
False
Currently, the approximate value of annual expenditures for all food and alcohol in the US is 106 billion dollars.
False; 106 trillion dollars
Food loss at the retail and consumer level in the US is estimated to be 16-18% of the total food (measured in pounds) available in the US.
False; 30%
Labor is the smallest portion of the Food Marketing Bill.
False; 50% is labor, 10% is packaging
In developed countries, such as North American and Europe, most of the food loss and waste occurs in the early stages of the agri-food system, not at the consumer level.
False; it is at the consumer level
About 25-30% of the land surface of the world is considered arable and can be used for crop production.
False; only 12%
The average US farmer feeds more than 300 people.
False; only around 200
Which of the following is true regarding production (farm level) agriculture?
Farm production is becoming less diversified and more specialized Farms are shifting away from production of homogenous commodities towards production of commodities with specific end use attributes Farmers must make decisions based upon expected prices and expected yields instead of known prices and yields
Which of the following is true regarding speculators and hedgers?
Hedgers seek to transfer their price risk to other traders The speculator's goal is to make a profit on price changes The goal of a hedger is to reduce the price risk that is part of his business
Which of the following would be considered one of the impacts of increased agricultural productivity in the agri-food system?
Improved efficiencies Larger farm size Greater dependence on global markets
Which of the following is true in how changing demographics will influence the future of the US agri-food system?
Increased importance will be placed on functional foods Per capita dairy consumption in the US is likely to decrease Greater emphasis will be placed on a food's environmental footprint
The Food Bill in the US increased by more than $3-- million from 2007 to 2014. Of the following potential reasons for increased food expenditures, which likely had the smallest impact on the Food Bill?
Increasing commodity prices at the farm gate
Which of the following is most likely reason for the upward trend in the Food Marketing Bill?
Increasing domestic population
Which of the following are biological uniqueness factors of the agri-food system?
Many agricultural products are perishable and need to reach consumers quickly Production lags result since agricultural products take time to produce Quality differences occur in commodities and food products (not all apples are identical)
Which of the following is most likely true regarding agricultural production in the US?
Nearly 25% of all agricultural production in the US is exported
Which of the following is most likely true?
On average, farmers receive 6-8% of the food dollar
Which of the following are true in reference to population?
One of the primary customers of an Institutional Wholesaler is the Food Service Retailer It is expected that in the future, the largest increase in food sales in the US will come from a growing population and export sales The average food product travels more than 1000 miles before it reaches the final consumer
Which of the following items has experienced an increasing trend over the last 50 years?
The Food Bill The US population Real (inflation adjusted) food prices
Which of the following is still true in reference to the Food Marketing Bill?
The Food Marketing Bill is typically smaller than the Food Bill Per capita calorie consumption in the US is approximately 3,500 calories a day Current real retail food price are approximately twice as much as they were in 1988
Which of the following would be considered the best example of geographic concentration?
The close proximity of production and processing of cucumber pickles in the fertile soils of the Saginaw Bay area
Due to wildfires, the price of wine has increased. If cheese is a complement of wine, what is the likely impact on the cheese market from the increase in the price of wine?
The demand curve for cheese will shift, decreasing both the price and the quantity traded in the market
If the results from a new study by the US Surgeon General's office show current caffeine consumption levels by American consumers are significantly increasing the risk of cancer, then one would expect the following to occur in the US coffee market...
The demand for coffee will decrease
Which of the following is true regarding the elasticity of supply?
The elasticity of supply is used to measure a movement along the supply curve
If muffins and donuts are substitutes and the supply of muffins increases, then the likely impact on the donut market will be that....
The price of donuts will decrease
Which of the following would influence the elasticity of demand?
The proportion of income that consumers spend on the good The availability of substitutes Time
Which of the following is true regarding farm production and elasticities?
The supply for a farm products is more elastic in the long run than in the short run The elasticity of demand for most farm products is inelastic For annual crops, once the harvest is complete, the supply curve is extremely inelastic
Which of the following are characteristics of the Millennials?
They rely on technology and are likely to shop online They are the largest group of the US population They tend to have selective spending
A person can sell a futures contract without being in physical possession of the commodity (i.e. owning the commodity).
True
Both futures and cash prices respond to the same underlying supply and demand factors.
True
Capital factors in the agricultural production, such as the high degree of asset specificity, mean that agricultural production firms are slow to adjust to market price signals.
True
Commodity quality is standardized in a futures contract.
True
If demand increases and supply is perfectly elastic, then there will be no change in the equilibrium price.
True
In the 20th century, technology was the primary driver of increased agricultural productivity at the farm level.
True
Michigan is one of the most agriculturally diverse states in the US.
True
More than 95% of the farms in the US are owned and operated by a family member.
True
Most futures contracts are closed by an offsetting trade and do not result in actual delivery or acceptance of the commodity.
True
Most people who trade on the commodity futures market are speculators.
True
On average, 80-85% of the Food Dollar is added by agricultural and food firms past the domestic farm gate.
True
The Intercontinental Exchange would be the exchange to go to if you wanted to trade soft commodities, such as sugar, coffee, and coca.
True
The average American typically spends less than 10% of his/her disposable income on food.
True
The more elastic demand is, the larger the change in quantity when price changes.
True
The more inelastic demand is, the bigger the change in price when supply changes.
True
When individuals who want to trade futures deposit funds with a brokerage firm in a margin account, typically only 5% of the overall value of the trade must de deposited.
True
Which of the following companies are considered food manufacturers?
Unilever Pinnacle Foods Mondelez International
Which of the following is true regarding value added in the agri-food system?
Value added is the difference between the cost of goods purchased by a firm and the price for which the firm sells those enhanced goods Players in the agri-food system may add value by changing an input's form Value is added at each economic stage in the agri-food system
A commodity processor would most likely sell...
Wheat flour to Kraft Foods
Which of the following players would be most likely to buy a soybean meal (used as animal feed) contract for its first move in the futures market?
a dairy farmer who uses soybean meal to feed his/her cows
A firm whos primary business is to buy food ingredients and sell a food product is most likely considered...
a manufacturer
One benefit to the consumer of a merger of newly formed SpartanNash may be...
decrease in its per unit costs of storage and distribution
If one wanted to estimate the impact on the coffee market due to new technology that increases the amount of coffee produced, then one would need to know ...
the elasticity of demand for coffee
An agri-food firm who takes commodity wheat, stores it in grain bins, and then turns it into wheat flour primarily adds what type (s) of value?
time and form
