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Ag Econ 289 > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

_____ Study dealing with large economies on topics such as growth and inflation

A

Macroeconomics

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2
Q

_____ The basic economic problem

A

Scarcity

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3
Q

_____ The value of the next best alternative

A

Opportunity Cost

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4
Q

_____ Motive which generally ensures good market system

A

Profit

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5
Q

_____ When a policy creates perverse incentives, leading to an outcome the opposite of the policy’s intent

A

Unintended Consequences

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6
Q

_____ Exists when a third party is harmed or benefited by a market transaction

A

Externality

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7
Q

_____ The act of profiting from price differences across regions or time periods

A

Arbitrage

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8
Q

_____ A person’s maximum willingness to pay for a good

A

Value

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9
Q

_____ All business activities involved in moving food from farm to fork

A

Ag Marketing

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10
Q

_____ Richard Thaler won a Nobel Prize in this field of economics

A

Behavioral

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11
Q

_____ Study that focuses on individual markets and individual business behavior

A

Microeconomics

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12
Q

_____ This states that when transaction costs are zero, the price for a similar good should be the same across all regions

A

Law of One Price

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13
Q

_____ Formal inverse relationship between quantity demanded and price

A

Law of Demand

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14
Q

_____ Concept that as price of a good decreases, real income of consumer increases

A

Income Effect

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15
Q

_____ Concept that as price of a good decreases, other goods appears more expensive

A

Substitution

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16
Q

_____ Concept that as consumption of a good increases, price must decline entice additional consumption

A

Diminished Utility

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17
Q

_____ Phrase meaning other things being equal

A

Ceteris Paribus

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18
Q

_____ Aspect of Agricultural supply where response is slowed by investment in capital assets used to produce a commodity

A

Asset Fixity

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19
Q

_____ Concept that consumers buy a good that gives them the most “bang for the buck”

A

Utility

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20
Q

_____ Adding value through the processing of raw materials into consumer goods

A

Form Utility

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21
Q

_____ Adding value through transporting of good to convenient locations

A

Place Utility

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22
Q

_____ Adding value by altering the time and availability of goods

A

Time Utility

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23
Q

_____ Desired quantity of a good, backed by the ability to buy at that price

A

Effective Demand

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24
Q

_____ Why the consumer is considered King

A

Derived Demand

25
Q

_____ Movement along the demand curse caused by changes in price of good

A

Change in Demand

26
Q

_____ Characterized by an upward sloping curve

A

Law of Supply

27
Q

_____ Structural change in quantity demanded of a good at the same price

A

Shift in Demand

28
Q

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

A

b. $ 10

29
Q

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

A

c. Focusing on advertising, promotion, and influencing behavior

30
Q

True or False

A linear demand function represents constant elasticity when moving along points on the demand curve.

A

False

31
Q

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

A

c. Basic Economic Problem

32
Q

True or False

Arbitrage is the act of profiting from price differences across regions or time, ensuring the force of one price

A

True

33
Q

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

A

b. $20,000

34
Q

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

A

d. Negative Externality

35
Q

True or False

A good example for a structural shift in demand is development of the ethanol market for corn

A

True

36
Q

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

A

d. All the above

37
Q

True or False

Every stage in the process of moving food from “farm to fork” adds value to the final product.

A

True

38
Q

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

a. Elastic

39
Q

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

a. Complements

40
Q

The Force of One Price is ensured by:

a. Equilibrium
b. Transaction Cost
c. Arbitrage
d. Hedging

A

c. Arbitrage

41
Q

True or False
Economic profit is measured by subtracting the value of the next best alternative from the accounting profit of another alternative.

A

True

42
Q

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

A

c. Changing income levels

43
Q

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

A

b. Time

44
Q

True or False

Within the food supply chain, PED and PES tend to be highest at the primary good level.

A

False

45
Q

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

A

d. Agricultural Marketing

46
Q

The basic economic problem is:

a. Diminishing Utility
b. Marginal Returns
c. Allocating resources
d. Profit maximization

A

c. Allocating resources

47
Q

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

a. Indifference

48
Q

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

A

d. Negative Externality

49
Q

True or False

A shift in supply or demand is also known as a structural change in a market.

A

True

50
Q

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

A

b. P = $2.00 Q = 5.0

51
Q

Given a demand function: Qd = 9-2P at P = 4 and Q = 1. What is PED?

a. -0.50 % Inelastic
b. -8.00 % Elastic

A

b. -8.00 % Elastic

52
Q

True or False

Price elasticity of demand (PED) depends primarily on the degree of substitutability and necessity of that good.

A

True

53
Q

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.

A

True

54
Q

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

A

b. a shift in supply to a lower quantity

55
Q

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.

A

False

56
Q

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

A

b. Substitutes

57
Q

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%

A

b. -9.0%

58
Q

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

A

b. Point C

Ag Econ 289 (3 decks)

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