Exam 1 Flashcards
_____ Study dealing with large economies on topics such as growth and inflation
Macroeconomics
_____ The basic economic problem
Scarcity
_____ The value of the next best alternative
Opportunity Cost
_____ Motive which generally ensures good market system
Profit
_____ When a policy creates perverse incentives, leading to an outcome the opposite of the policy’s intent
Unintended Consequences
_____ Exists when a third party is harmed or benefited by a market transaction
Externality
_____ The act of profiting from price differences across regions or time periods
Arbitrage
_____ A person’s maximum willingness to pay for a good
Value
_____ All business activities involved in moving food from farm to fork
Ag Marketing
_____ Richard Thaler won a Nobel Prize in this field of economics
Behavioral
_____ Study that focuses on individual markets and individual business behavior
Microeconomics
_____ This states that when transaction costs are zero, the price for a similar good should be the same across all regions
Law of One Price
_____ Formal inverse relationship between quantity demanded and price
Law of Demand
_____ Concept that as price of a good decreases, real income of consumer increases
Income Effect
_____ Concept that as price of a good decreases, other goods appears more expensive
Substitution
_____ Concept that as consumption of a good increases, price must decline entice additional consumption
Diminished Utility
_____ Phrase meaning other things being equal
Ceteris Paribus
_____ Aspect of Agricultural supply where response is slowed by investment in capital assets used to produce a commodity
Asset Fixity
_____ Concept that consumers buy a good that gives them the most “bang for the buck”
Utility
_____ Adding value through the processing of raw materials into consumer goods
Form Utility
_____ Adding value through transporting of good to convenient locations
Place Utility
_____ Adding value by altering the time and availability of goods
Time Utility
_____ Desired quantity of a good, backed by the ability to buy at that price
Effective Demand
_____ Why the consumer is considered King
Derived Demand
_____ Movement along the demand curse caused by changes in price of good
Change in Demand
_____ Characterized by an upward sloping curve
Law of Supply
_____ Structural change in quantity demanded of a good at the same price
Shift in Demand
Producers have a point of indifference for the premium they would pay for a new technology. A firm offering a new GMO seed that lowers per acre cost of production by $15 would likely maximize their profits at what price point?
a. $ 15
b. $ 10
c. $ 7
d. $ 5
b. $ 10
Each of the following is related to the primary definition of agriculture marketing except:
a. Analyzing flow of good through the supply chain
b. Explaining how markets function and observing behavior
c. Focusing on advertising, promotion, and influencing behavior
d. Determining how price formation occurs in a market
c. Focusing on advertising, promotion, and influencing behavior
True or False
A linear demand function represents constant elasticity when moving along points on the demand curve.
False
The challenge of allocating scarce resources through a market-based system is best defined as:
a. Diminishing Utility
b. Marginal allocation
c. Basic Economic Problem
d. Profit Maximization
c. Basic Economic Problem
True or False
Arbitrage is the act of profiting from price differences across regions or time, ensuring the force of one price
True
A farmer can make accounting profits $60,000 per year planting wheat, $40,000 per year planting canola, or $20,000 per year planting barley. Assume only one crop will be planted. What is the economic profit of planting wheat?
a. $10,000
b. $20,000
c. $30,000
d. $40,000
b. $20,000
The harm done to a third party as the result of a transaction between a buyer and seller is best described as a:
a. Market failure
b. Positive Externality
c. Unintended Consequence
d. Negative Externality
d. Negative Externality
True or False
A good example for a structural shift in demand is development of the ethanol market for corn
True
The consumer is considered king of the food supply chain because:
a. All demand is derived at the consumer level
b. The consumer provides a signal for supply response
c. Farm-level demand for a commodity is determined at the retail level.
d. All the above
d. All the above
True or False
Every stage in the process of moving food from “farm to fork” adds value to the final product.
True
A commodity which sees a 25% decline in quantity demanded for a 10% increase in price would be considered:
a. Elastic
b. Unit Elastic
c. Inelastic
a. Elastic
The cross price elasticity (XED) of demand for salad dressing with respect to price of a salad is a negative 2.5. This means the two goods are:
a. Complements
b. Substitutes
a. Complements
The Force of One Price is ensured by:
a. Equilibrium
b. Transaction Cost
c. Arbitrage
d. Hedging
c. Arbitrage
True or False
Economic profit is measured by subtracting the value of the next best alternative from the accounting profit of another alternative.
True
The most important long-run shifter of demand for agricultural products is:
a. Price of other goods
b. Consumer tastes and preferences
c. Changing income levels
d. Population growth
c. Changing income levels
A grocery store stocking a front-door display of snacks and beverages just for Super Bowl Sunday is best described as what type of utility?
a. Form
b. Time
c. Place
b. Time
True or False
Within the food supply chain, PED and PES tend to be highest at the primary good level.
False
All activities involved in moving food from farm to fork is best defined as:
a. Merchandising
b. Market Development
c. Business Marketing
d. Agricultural Marketing
d. Agricultural Marketing
The basic economic problem is:
a. Diminishing Utility
b. Marginal Returns
c. Allocating resources
d. Profit maximization
c. Allocating resources
The point at which a consumer becomes complacent about responding to an incentive is best described as:
a. Indifference
b. Interaction
c. Unintended Consequences
d. Internality
a. Indifference
The harm done to a third party as a result o a market transaction is referred to as:
a. Market failure
b. Positive Externality
c. Negative Internality
d. Negative Externality
d. Negative Externality
True or False
A shift in supply or demand is also known as a structural change in a market.
True
Given Qs = 1+2P and Qd = 9-2P What is the equilibrium price & quantity?
a. P = $1.75 Q = 4.5
b. P = $2.00 Q = 5.0
c. P = $2.75 Q = 5.5
b. P = $2.00 Q = 5.0
Given a demand function: Qd = 9-2P at P = 4 and Q = 1. What is PED?
a. -0.50 % Inelastic
b. -8.00 % Elastic
b. -8.00 % Elastic
True or False
Price elasticity of demand (PED) depends primarily on the degree of substitutability and necessity of that good.
True
True or False
Price elasticity of supply (PES) depends primarily on the amount of response time involved and whether or not it is at the primary or retail manufacturing level.
True
The U.S. Government increases the acreage for wheat allowed into Conservation Reserve Program. In terms of supply fro wheat, would what be the expected response?
a. a movement along the supply curve to a lower quantity
b. a shift in supply to a lower quantity
b. a shift in supply to a lower quantity
True or False
For a commodity with a PED of 8, a 5% increase in price would result in a 40% increase in quantity demanded.
False
If an XED analysis shows a 5% increase in price of butter leads to a 5% increase in quantity demanded of margarine, butter and margarine would be considered:
a. Complements
b. Substitutes
b. Substitutes
Given a demand function: Qd = 9-2P-0.3Y at P=4, Q=1, and Y of 30. What is YED?
a. +9.0%
b. -9.0%
b. -9.0%
Given a PED on the demand curve at point A of -8 and PED at point C of -0.28. From which point would raising the price result in higher total revenue?
a. Point A
b. Point C
b. Point C
