1. Name two specific reasons from course materials why study of agricultural markets is important.

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1 Exam 1 Questions 1-47 Exam questions will be multiple choice, fill-in-the-blank, short answer-type, and/or graphical analysis questions. Below are a number of questions and study topics that are similar to those that may be on the exam. For full credit, students should answer questions concisely using the terminology presented in the course materials. For this exam, students may bring a regular non-graphing calculator (i.e., no cell phones or other mobile communication devices). Remember too that a student s writing in all courses is expected to meet acceptable standards for college-level English. Instructors may include the quality of writing (e.g., spelling, grammar, handwriting, etc.) as a factor in students grades. 1. Name two specific reasons from course materials why study of agricultural markets is important. 2. A is a group of buyers and sellers organized for the purposes of exchanging goods and services. 3. True or False. Agricultural marketing is basically about the processes and actors involved in getting agricultural products from the farm to final consumers. 4. Name and clearly explain how agricultural markets are different than most other markets. 5. Name seven major components of a typical agricultural marketing chain and give a good example of typical actors at each stage. 6. Wholesalers are a drain on the agricultural marketing chain because they don t play any important roles but instead only drive up costs. Is this statement true or false? If false, explain two important value-added services provided by wholesalers. 7. Input suppliers describe only those firms that provide inputs to farmers like fertilizer, seeds, and young animals. Is this statement true or false? If false, give two examples of inputs supplied to non-farmers. 8. Two agricultural economists debated about the marketing chain for cheese. Mr. Green said that the marketing chain consisted of all seven of the major agricultural marketing sectors. Ms. Blue said it included fewer sectors. Who is right? Mr. Green? Ms. Blue? Both? Neither? Explain your answer clearly. 9. Write a one sentence justification for the following statement: Agricultural marketing is complex. 10. True or False. Farm value is the value of all farmland and permanent improvements upon the land. 11. Name two important ways to measure the importance of agricultural marketing quantitatively. 12. Farming and agricultural marketing accounts for approximately what percent of U.S. GDP? a) 1% b) 6% c) 12% d) 33% 13. Consumer expenditures on food are the sum of what two major components? 14. Farm-to-retail price spreads are estimated for individual commodities and small groups of commodities. Are farm-to-retail price spreads estimated for all foods combined? Why or why not?

2 15. Since 1960, which of the following increased most as a percent: aggregate annual national U.S. income, total annual U.S. food expenditures, or the annual U.S. marketing bill? 16. What is the difference between the marketing bill and farm-to-retail price spreads? 17. Characterize changes in annual U.S. per capita consumption of major food commodities in recent decades (see Table 1). Since 1980, what foods do U.S. consumers now tend to buy more of? Less of? 18. Give a good specific example of value-added agricultural production with reference to the relevant marketing chain. 19. In recent decades, the U.S. farm value share has decreased, meaning that the share of an average food dollar spent in the U.S. that goes to farmers has gotten smaller and smaller over time. Does this mean that farmers in the U.S. worse off? Explain. 20. Do farmers in the U.S. receive a greater share of at-home food expenditures or away-from-home food expenditures? Approximately, what percent of at-home food expenditures went to farmers in 2011? Approximately, what share of away-from-home food expenditures went to farmers in 2011? 21. What percent of a typical food dollar spent in 2011 went to pay for employee salaries and benefits? 22. Explain why aggregate nominal income in the U.S. has increased so rapidly since World War II. 23. In 1960, U.S. consumers allocated about 20 percent of the family food budget to away-from-home food expenditures. What percent of a typical U.S. family food budget was allocated to away-from-home food expenditures in 2010? 24. As a share of all U.S. food expenditures, which is greater: farm value or the marketing bill? As a share of all U.S. at-home U.S. food expenditures, which is greater: value added by food processing or by advertising? As a share of all away-from-home food expenditures, which is greater: value added by food services or by all the other marketing sectors combined? 25. Name and describe several ways that U.S. consumer food preferences have changed over recent decades (e.g., 1960 to 2010).

3 26. Be able to make per capita calculations. For example, using Table 2 below, calculate U.S. per capita red meat production in Be sure to state the appropriate units (i.e., pounds per person). Table 2. U.S. Red Meat Disappearance Year U.S. Population Production Imports Beginning Exports Ending Disappearance Millions Million Pounds , , , , , , , , ,176 1, ,038 2, ,409 3, ,675 2,832 1,004 2, ,848 4,804 1,187 3,372 1, ,180 3,322 1,114 6,539 1,145 Source: USDA, ERS, Given values for two different periods, be able to calculate percent change. Using Table 2 above, calculate the percent change in U.S. red meat production and percent change in U.S. population from 1915 to Be sure to indicate the appropriate units. 28. Using Table 2 above, calculate disappearance for red meat for each of the years given from 1915 to Be sure to indicate the appropriate units. 29. Given information about Total Supply and Total Use, calculate disappearance. Total Supply (ST): Beginning (BST) + Production (QT) + Imports (MT) Total Use (UT): Disappearance (DT) + Exports (XT) + Ending (EST) Calculate disappearance (DT) given: EST-1 = 60 QT = 600 MT = 100 XT = 50 BST+1 = True or False. Generally the farm value shares for individual food products increase as the degree of processing and other marketing services increases. 31. True or False. Foods derived from animal products probably have higher farm value shares than foods derived from plant products. 32. True or False. In recent decades, the farm-to-retail price spreads for individual foods and/or groups of foods have grown and farm value shares have dropped. 33. Assume corn syrup costs $2.00 for 16 ounces at the retail level. What would you guess is the approximate farm-to-retail price spread for corn syrup? a) $1.96 b) 98% c) $0.06 d) 2%

4 34. Given farm-level and retail prices and conversion factors, calculate the farm-to-retail price spread. Given the information below, calculate the farm-to-retail price spread for pork for Retail Pork Price (2012): $3.47 / pound Hog Price (2012): $1.05 / pound Conversion Factor: A 600 pound hog yields 321 pounds of retail pork cuts or it takes about 1.87 pounds of hog at the farm level to produce 1 pound of pork at the retail level. 35. Calculate the farm price equivalent, the farm-to-retail price spread and the farm value share for the following individual commodities Product prices (in dollars) and farm-to-retail price conversion factors Product Retail Farm Conversion Farm price Farm-to-retail price price Factor equivalent price spread ($) Beef, 1 pound Potatoes, 1 pound Broccoli, 1 pound Tomatoes, 1 pound Farm share (%) 36. Given nominal prices and a price index, be able to 1) calculate real prices and 2) rescale the index to have a different base period. Rescale the index below to create Calculate the real prices for non-organic carrots (base = create an index with a base year of ). Table 3. Consumer Price Index (CPI) Year Base = Base = Data Source: BLS Table 4. U.S. Farm Price, Non-organic Carrots Year Nominal Price ($/cwt) Price Index ( = 100) Real Price ($/cwt) 37. Suppose that the CPI annual average for 2010 ( = base year) is If your salary was $23,000 in 2005 (CPI = 195.3) and your salary was $25,000 in 2010, has the purchasing power of your salary increased or decreased over this period relative to the general rise in consumer prices? How much? What salary level for 2010 would keep your real income constant compared to your 2005 income?

5 38. Use Table 1 below to answer the following questions: A. Create an index for farm value with 2011 as the base year and use the index to tell how farm value increased as a percent from 1993 to B. Calculate percent change in farm value from 1993 to Then, calculate percent change in farm value from 2001 to In which period did farm value increase the most as a percent? Explain how you got your answer. C. In 2011, the marketing bill comprised what proportion of consumer expenditures on food? D. How much were consumer expenditures in 2011? State the unit of your answer. 39. Use Table 5 below to answer the following questions: A. Create an index for food expenditures with 2010 as the base period. Use your index to tell how much higher or lower as a percent food expenditures were in 2010 than in B. Calculate the percent change in nominal income from 1960 to Then, calculate the percent change in income from 1985 to In which period did nominal incomes increase more as a percent? 40. Use Table 5 above and Table 6 below to answer the following questions: A. What is nominal per capita income for 1960 and 2010? B. What is the percent change in nominal per capita income from 1960 to 201? C. What is the percent change in nominal per capita food expenditures from 1960 to 2010?

6 41. Use Table 5 above and Table 7 below to answer the following questions: A. How much as a percent have nominal per capita at-home food expenditures changed from 1960 to 2010? B. How much as a percent have nominal per capita away-from-home food expenditures changed from 1960 to 2010? 42. Use Table 7 above and Table 2 below to answer the following questions: A. Were real at-home food expenditures more or less in 2010 as compared to 1960? Show your work. B. How much more or less as a percent were real at-home food expenditures in 2010 compared to 1960? Show your work. 43. Use Table 6 and Table 7 above and Table 2 below to answer the following questions: A. Calculate nominal per capita food expenditures for 1960 and B. Calculate percent change in nominal per capita food expenditures from 1960 to C. Calculate real per capita food expenditures on food for 1960 and D. Calculate percent change in per capita real food expenditures from 1960 to E. Calculate percent change in U.S. population from 1960 to Use Table 5 below to answer the following questions: A. As a percent, how much less were farm land values in WV than in KY in 2008? B. Using the formula for percent change, calculate how much more as a percent agricultural land values were in Ohio than in Tennessee in C. Create an index for farm land value with Ohio as the base unit. D. Using your new index, identify how much more as a percent agricultural land values were in Ohio than in Tennessee in 2008?

7 45. Use Table 3 below to answer the following questions: 2010 A. What is real income for 1960 and 2010 using the CPI above with a base period of B. Rescale the CPI index ( = 100) to have a base period of C. Calculate real income for 1960 and 2010 using the CPI index (1960 = 100) above. D. Calculate percent change in real income from 1960 to 2010 using the CPI index (1960 = 100) above. 46. Use Table 2 below to answer the following questions: Table 2. U.S. Red Meat Disappearance Year U.S. Population Production Imports Beginning Exports Ending Disappearance Millions Million Pounds , , ,180 3,322 1,114 6,539 1, Use Table 1 below to answer the following questions: A. What were per capita red meat exports from the U.S. in 1915 and in 2010? State the units of you answer. B. What is percent change in per capita red meat exports from the U.S. from 1915 to 2010? State the unit of you answer. A. If fresh pineapple costs $4.00 per pound at the retail level and $1.00 per pound at the farm level, what is the farm-to-retail price spread for fresh pineapple? B. If fresh pineapples cost $1.00 per pound at the farm level (e.g., in Hawaii), what is the minimum break even retail price per pound? C. If fresh tomatoes cost $2.00 per pound at the retail level, what is the highest farm level price that retail buyers could pay and still break even?