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AGRI 215 Lecture : Farm Support Systems

95 views1 pages
sapphirecod69
7 Dec 2011
School
McGill University
Department
Agriculture
Course
AGRI 215
Professor
Caroline Begg Roger Cue

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Document Summary

Farm support can include things like subsidies, quota, set-a-side policies, legislation for marketing, tariffs, import control (not always as efficient as they want to be and some times they are not efficient at all) Subsidies can be expensive to governments so generally are avoided, while quota costs the canadian government next to nothing to keep this system in place. Set-a-side: set a side part of the land to keep out of production, cutting supply and increasing prices. Government will pay the farmer x dollars/hectare to not produce product. All of these support systems depend on different circumstances: Like whether the country is an importer or exporter. Used mostly to keep food prices relatively low to feed urban population. In developing world this can be reversed and helps farmers get income for rural communities. Quota systems are can differ, in canada quota was originally allocated based on current needs, than a monetary value was attached.

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Related Questions

Why have politicians always favored using subsidies to promote certain economic activities?

a. They can be treated as benefits that can be widely spread in response to many demands.

b.They are generally cheaper than other forms of government support.

c.Recipients are always required to pay back the subsidies.

d.Congress does not have to pass legislation in order to provide subsidies.

e.They are paid for through international tariffs rather than personal income taxes.

Why have politicians always favored using subsidies to promote certain economic activities?
 
a. They can be treated as benefits that can be widely spread in response to many demands.
b.They are generally cheaper than other forms of government support.
c.Recipients are always required to pay back the subsidies.
d.Congress does not have to pass legislation in order to provide subsidies.
e.They are paid for through international tariffs rather than personal income taxes.

 

Corn is a very valuable product for which the U.S. government routinely offers subsidies. With no price support, the equilibrium price for corn is $300 per ton and the equilibrium quantity is 500 million tons per year. Suppose that the government agrees to pay farmers $350 for every ton of corn they produce and can't sell in the market. According to the farmer's market supply curve, 600 million tons per year is supplied at the price of $350 a ton, so production should increase to this amount. However, domestic users of corn cut back their purchases. Only 450 million tons a year is demanded at the price of $350 a ton, and purchases decrease to this amount. Farmers continue to produce 500 million tons of corn per year, so because they produce a greater quantity of corn than domestic buyers are willing to purchase, something must be done with the surplus. To make the price support work, the government decides to buy the surplus. Step 2 Use the scenario to answer the following questions. In a one-page (250-word) document, answer the following questions using the information provided in the scenario from Step 1: * In this example, how many million tons does the government agree to buy? At what price? * How much in total does the U.S. government provide in subsidy to the corn farmers? Why? * Is the price support in this example efficient or inefficient? Explain your reasoning. * Is the subsidy fair? Explain your reasoning.