Agricultural Economics & Marketing Review Questions for LEA

1. The law of diminishing returns in agricultural production states that:

• a) Output increases proportionally with every additional unit of input used.
• b) Beyond a certain point, adding more of a variable input to fixed inputs results in smaller increases in output.
• c) The total production always increases with every additional input.
• d) Production cost decreases indefinitely with increased input use.

2. In agricultural marketing, “market margin” refers to:

• a) The total cost of production incurred by the farmer.
• b) The difference between the retail price paid by the consumer and the price received by the producer.
• c) The amount spent on farm inputs.
• d) The markup added by farmers on their produce.

3. The function of grading and standardization in agricultural marketing primarily ensures:

• a) Stabilization of production costs.
• b) Fair pricing and quality assurance of agricultural products.
• c) Improvement in soil fertility.
• d) Reduction of government intervention in marketing.

4. The break-even point in farm budgeting occurs when:

• a) Total cost is greater than total revenue.
• b) Total revenue equals total cost.
• c) Total revenue is less than total cost.
• d) Marginal revenue is zero.

5. Under the Agriculture and Fisheries Modernization Act (AFMA) of 1997, one of the key goals is to:

• a) Encourage import substitution and restrict export markets.
• b) Modernize the agriculture and fisheries sectors to enhance productivity and competitiveness.
• c) Reduce agricultural research and development programs.
• d) Limit farmers’ access to credit and markets.

6. In agricultural finance, the “Five Cs of Credit” refer to character, capacity, capital, collateral, and:

• a) Competition
• b) Condition
• c) Commitment
• d) Cooperation

7. Which of the following best describes “oligopsony” in agricultural marketing?

• a) A market with few sellers and many buyers.
• b) A market with many sellers and few buyers.
• c) A market with only one seller.
• d) A market with perfect competition.

8. Farm management primarily deals with:

• a) Analysis and decision-making for efficient use of farm resources to maximize returns.
• b) Determining international agricultural trade policies.
• c) Regulating input prices across different farms.
• d) Monitoring national agricultural GDP growth.

9. In agricultural production economics, the stage of increasing returns occurs when:

• a) Marginal product is declining but still positive.
• b) Marginal product is increasing with additional input.
• c) Marginal product is negative.
• d) Total product is decreasing.

10. The role of the National Food Authority (NFA) in the Philippines includes:

• a) Managing the importation and distribution of petroleum products.
• b) Stabilizing the supply and price of staple grains, particularly rice and corn.
• c) Supervising livestock auctions.
• d) Setting minimum wage rates for agricultural laborers.

11. In agricultural marketing, “assembling” refers to the process of:

• a) Collecting products from various producers for bulk sale or processing.
• b) Breaking bulk into smaller quantities for retail sale.
• c) Transporting goods directly from farmers to consumers.
• d) Storing goods for price stabilization.

12. The most effective marketing channel for perishable farm commodities is usually:

• a) Producer → Wholesaler → Retailer → Consumer
• b) Producer → Consumer
• c) Producer → Cooperative → Wholesaler → Retailer → Consumer
• d) Producer → Exporter → Importer

13. Which of the following best explains the concept of “price elasticity of demand” in agricultural marketing?

• a) The degree to which the quantity demanded responds to a change in price.
• b) The responsiveness of price to supply shifts only.
• c) The difference between wholesale and retail prices.
• d) The rate at which prices increase over time.

14. The main objective of market intelligence in agricultural marketing is to:

• a) Promote farm mechanization.
• b) Collect, analyze, and disseminate information for better market decisions.
• c) Monitor soil and water conditions.
• d) Provide subsidies for farm equipment.

15. Which among the following is an example of a derived demand in agriculture?

• a) Demand for fertilizers based on the demand for crops.
• b) Demand for consumer goods unrelated to agriculture.
• c) Demand for land ownership among urban residents.
• d) Demand for imported agricultural machinery only.

16. In the context of agricultural marketing, “hedging” is primarily used to:

• a) Insure crops against pest infestation.
• b) Protect traders or producers from price fluctuations in the market.
• c) Increase the size of agricultural holdings.
• d) Ensure uniform product quality.

17. The marketing function that adds “place utility” to agricultural products is:

• a) Transportation
• b) Storage
• c) Grading
• d) Financing

18. A perfectly competitive market for agricultural goods is characterized by:

• a) Homogeneous products and free entry and exit of buyers and sellers.
• b) Product differentiation and government price control.
• c) Few sellers controlling the market supply.
• d) One dominant buyer and many sellers.

19. In agricultural production, the “isoquant” represents:

• a) All combinations of inputs that yield the same level of output.
• b) The cost curve of a farm enterprise.
• c) The profit-maximizing combination of resources.
• d) The rate of technological progress on farms.

20. The marketing cost that includes storage, spoilage, and depreciation of equipment is known as:

• a) Fixed cost
• b) Variable cost
• c) Marketing margin
• d) Physical cost

21. The Agriculture and Fisheries Modernization Act (AFMA) of 1997 in the Philippines aims to:

• a) Reduce agricultural subsidies and privatize public lands.
• b) Promote sustainable development, modernization, and competitiveness in the agriculture and fisheries sectors.
• c) Restrict foreign investment in agribusiness.
• d) Focus solely on industrial and manufacturing growth.

22. Which government agency is responsible for implementing agrarian reform in the Philippines?

• a) Department of Agriculture (DA)
• b) Department of Agrarian Reform (DAR)
• c) Department of Trade and Industry (DTI)
• d) National Food Authority (NFA)

23. The Comprehensive Agrarian Reform Program (CARP) primarily aims to:

• a) Increase the agricultural exports of the Philippines.
• b) Redistribute agricultural lands to landless farmers and farmworkers.
• c) Regulate food prices in domestic markets.
• d) Promote urban housing development.

24. The principle of opportunity cost in agricultural economics refers to:

• a) The actual cost of all farm inputs.
• b) The value of the next best alternative foregone when a choice is made.
• c) The total cost minus total revenue.
• d) The cost of unutilized land resources.

25. Which of the following best describes “agricultural protectionism” in economic policy?

• a) Free and unrestricted trade of agricultural goods.
• b) Use of tariffs, quotas, or subsidies to protect domestic agriculture from foreign competition.
• c) Reduction of all government support for farmers.
• d) Encouraging full privatization of farm resources.

26. A positive externality in agriculture occurs when:

• a) A farmer’s activity benefits others without being compensated.
• b) A farm’s operation causes pollution to nearby areas.
• c) A subsidy is removed from the market.
• d) Farmers compete in monopolistic conditions.

27. The basic economic problem of scarcity in agriculture arises because:

• a) Resources are limited but human wants are unlimited.
• b) Resources are unlimited but human wants are few.
• c) Farmers prefer not to maximize production.
• d) Government restricts production deliberately.

28. Which of the following statements correctly describes the role of agriculture in economic development?

• a) Agriculture serves as a source of capital, labor, and raw materials for industrial growth.
• b) Agriculture reduces the need for technological innovation.
• c) Agriculture slows down overall national income growth.
• d) Agriculture plays no role in export diversification.

29. The GDP contribution of the Philippine agriculture sector is usually around:

• a) 5–6%
• b) 9–10%
• c) 15–20%
• d) 25–30%

30. The term “agribusiness” refers to:

• a) Only the activities of primary crop producers.
• b) The totality of all operations involved in the production, processing, and distribution of agricultural products.
• c) The study of agricultural history and land reform.
• d) Only post-harvest marketing and retailing.

31. In agricultural marketing, the concept of “price spread” refers to:

• a) The difference between retail price and wholesale price
• b) The difference between producer’s price and consumer’s price
• c) The fluctuation of prices in international markets
• d) Seasonal variations in farmgate prices

32. The “Law of One Price” in agricultural markets assumes that:

• a) All sellers charge the same price irrespective of location
• b) Identical goods will sell for the same price in all markets when transport cost is zero
• c) Government fixes a uniform minimum price for crops
• d) Price discrimination is common in rural markets

33. The marketing margin is best defined as:

• a) The difference between the total marketing cost and producer’s price
• b) The profit margin earned by middlemen
• c) The difference between the price paid by consumers and received by producers
• d) The margin allowed by banks on credit to farmers

34. In the context of market structure, a perfectly competitive agricultural market is characterized by:

• a) Few sellers and many buyers
• b) Homogeneous products and many buyers and sellers
• c) Product differentiation and brand loyalty
• d) Government price control on all products

35. The term “marketable surplus” refers to:

• a) Total production minus family consumption and seed requirements
• b) Total production before meeting any family needs
• c) The stock retained by farmers for the next season
• d) Total quantity sold to middlemen and processors

36. Which of the following is NOT an essential function of agricultural marketing?

• a) Grading and standardization
• b) Buying and assembling
• c) Production and cultivation
• d) Transportation and storage

37. Which of the following represents the correct order of marketing channels in agricultural produce?

• a) Producer → Commission Agent → Wholesaler → Retailer → Consumer
• b) Consumer → Retailer → Wholesaler → Producer
• c) Producer → Retailer → Wholesaler → Consumer
• d) Wholesaler → Producer → Consumer → Retailer

38. The “Cobweb Model” in agricultural economics explains:

• a) The long-term price equilibrium under perfect competition
• b) Price fluctuations caused by time lag between production decisions and actual output
• c) The pattern of price determination under monopoly
• d) The government’s control over agricultural pricing

39. In agricultural markets, arbitrage refers to:

• a) Buying in one market and selling in another to profit from price differences
• b) Storing produce for future sale
• c) Manipulating prices by withholding stocks
• d) Fixing minimum support prices

40. Which of the following statements about futures trading in agricultural commodities is TRUE?

• a) It completely eliminates price risk for farmers
• b) It helps in price discovery and hedging against future price fluctuations
• c) It is illegal for food grains and pulses
• d) It involves direct physical delivery of goods on every contract

41. The demand for agricultural products is generally considered:

• a) Perfectly elastic
• b) Relatively inelastic
• c) Perfectly inelastic
• d) Highly elastic in the long run

42. Which of the following best explains “hedging” in agricultural marketing?

• a) Speculating on future price increases
• b) Entering into futures contracts to reduce price risk
• c) Storing goods to manipulate market prices
• d) Withholding produce to control supply

43. In agricultural marketing, the term “vertical integration” refers to:

• a) Collaboration between farmers at the same level of production
• b) The coordination of production, processing, and marketing functions under one organization
• c) Price agreements among wholesalers
• d) Government regulation of input subsidies

44. Which type of market is characterized by a single buyer and many sellers?

• a) Monopoly
• b) Oligopoly
• c) Monopsony
• d) Duopoly

45. The demand curve for an individual farm product is:

• a) Perfectly elastic under perfect competition
• b) Perfectly inelastic under monopoly
• c) Upward sloping under duopoly
• d) Relatively inelastic under perfect competition

46. “Farm Management” primarily deals with:

• a) Efficient allocation of farm resources for profit maximization
• b) Agricultural policy formulation
• c) Distribution of agricultural products in markets
• d) International trade of farm goods

47. The “Engel’s Law” in agricultural economics states that:

• a) As income increases, the proportion of income spent on food decreases
• b) As income increases, food expenditure remains constant
• c) Food expenditure rises faster than income
• d) The elasticity of demand for food is unity

48. “Parity price” in agricultural economics refers to:

• a) Price at which total revenue equals total cost
• b) Price that gives a fair return to farmers relative to prices of goods they buy
• c) Minimum support price fixed by the government
• d) International reference price for export commodities

49. The “Indifference Curve” in agricultural economics represents:

• a) Different combinations of two goods providing the same satisfaction
• b) The budget constraint faced by consumers
• c) The relationship between price and demand
• d) The cost structure of a farm enterprise

50. The “Income Elasticity of Demand” for food products in developing countries is generally:

• a) Greater than one
• b) Equal to one
• c) Less than one
• d) Zero