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Self-test questions
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1The cap accounts for about 60 per cent of the EU Budget
A)True
B)False


2The economics of the tariffs used to raise EU food prices above the price floor are quite similar to the standard tariff analysis presented in Chapter 4.
A)True
B)False
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Baldwin_Fig_9.2::/sites/dl/free/0077169654/1063945/baL69654_0902.gif','popWin', 'width=800,height=570,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Baldwin_Fig_9.2 (66.0K)</a>Baldwin_Fig_9.2

Figure 9.2 should be used in answering this question.



3The variable import levy lowers the EU price by taxing imports.
A)True
B)False


4Look at figure 9.2 again.

The domestic price ends up as the world price plus the tariff, for example, Pw + T. At this price, all domestic production (equal to Zf) is sold at the price floor, where the subscript ‘f’ indicates ‘floor’.
A)True
B)False
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Baldwin_Fig_9.3::/sites/dl/free/0077169654/1063945/baL69654_0903.gif','popWin', 'width=800,height=570,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Baldwin_Fig_9.3 (74.0K)</a>Baldwin_Fig_9.3

Figures 9.2 and 9.3 should be used in answering this question.



5Which of the following statements is not correct?
A)The higher price (Pw + T instead of Pw) means that consumer surplus falls by A + C1 + B + C2.
B)The first part, A + C1 + B, reflects the higher cost that consumers pay for the food they continue to consume.
C)The second part, C2, is what they lose from the tariff-induced drop in consumption.
D)For producers, the gain in producer surplus is equal to area A+C1


6The benefits of price supports go mainly to the smallest EU farms because in small farms the support is tied to level of production and because small farms tend to be more efficient (so their costs are lower).
A)True
B)False


7When the EU was no longer a food importer, the price floor could not be maintained by a variable levy.
A)True
B)False


8While the world’s net food exporters did not complain, EU dumping infuriated the world’s large food importers.
A)True
B)False


980 per cent of the farms get only 15 per cent of the money from the CAP
A)True
B)False


10The cut-prices-and-compensate reform lowers the price that both consumers and producers see in terms of the old price floor and the world price. This reduces EU output, raises EU consumption, thus eliminating the need for the EU to buy unwanted food and dump it on the world market.
A)True
B)False


11Pinpoint those of the following statements that are describing central aims of the Common Agricultural Policy of the EU.

i) To support rural development.
ii) To support urban development.
iii) To maximize consumer surplus by lowering prices to a minimum.
iv) To secure safety of supply
v) To promote environmentally high standards of food productions.
vi) to increase producer surplus and the conditions for farmers.
A)i, ii, iii and vi
B)i, iii, iv, and vi
C)i, iii, iv and v


12There have been three major CAP reforms since the MacSharry package. All involved further price cuts that were compensated by direct payments to landowners. The first resulted from the March meeting of the European Council in Berlin. The prime driver of this reform was the need to get the CAP ready for eastern enlargement and to prepare it for a falling budget share in the 2000–06 Financial Perspective. The second came in . The third was embodied in the new Multiannual Financial Framework.


13The producer subsidy equivalent (PSE), which is calculated by the OECD, shows the sum of all supports to EU farmers from the CAP and national sources.
A)True
B)False


14A key goal of the 2014–20 reforms is to achieve ‘convergence’, i.e. a more equal distribution of support. As part of this, Member States will use a uniform payment per hectare by the start of 2019.
A)True
B)False


15There are only ____ million people working in the farm sector in the EU.
A)5.6 million
B)12.6 million
C)25.6 million
D)45.6 million


16The later reforms of the CAP have the purpose of coupling support to production.
A)True
B)False


17There are at least three kind of goals that are set in the new agricultural policies where payments are unrelated to food production. Name these three goals from the four choices below.

More than one answer is correct.
A)environment
B)animal welfare
C)low consumer prices
D)rural development.


18Agriculture’s share of GDP was in the 1950’s around 8-21 per cent in EEC6 countries.
A)True
B)False





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