Practice Exam 1 Flashcards by eryn no

Scarce resources like land, labor, and capital can be categorized as:

(a) human resources
(c) manufactured resources
(b) natural and biological resources
(d) all the above

(d) all of the above

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Which of the following statement(s) is (are) false?

(a) The number of U.S. farms at present is about 2 million.
(b) The average size of U.S. farms is between 800 and 1,000 acres.
(c) At present, most U.S. farms are organized as partnerships and corporations.
(d) Both (b) and (c).

(d) Both (b) and (c).

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Economic reasoning that is true for one individual but not for society as a whole is referred to as:

(a) Fallacy of composition
(c) Opportunity cost
(b) Specialization
(d) None of the above

(a) Fallacy of composition

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What branch of economics is concerned with the effects of nutrition labeling on the dietary quality of consumers (i.e. what-if types of questions)?

(a) normative economics
(c) microeconomics
(b) positive economics
(d) macroeconomics

(b) positive economics

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An agribusiness firm may undertake three alternatives:
(i) buy cane sugar and manufacture various sugars and sweets, making a profit of $12 million; or
(ii) buy corn and produce ethanol, making a profit of $16 million; or
(iii) buy wheat and produce breads, rolls, and pastries, making a profit of $13 million.
The opportunity cost associated with these three choices is:
(a) $3 million (c) $13 million
(b) $4 million (d) $16 million

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Congress commissioned a study to determine what the poverty level or minimum level for subsistence
should be for the U.S. population. To what branch of economics does this study correspond?
(a) normative economics
(c) microeconomics
(b) positive economics
(d) macroeconomics

(a) normative economics

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What branch of economics is concerned with interest rates and the gross domestic product (GDP) of the U.S. economy?

(a) normative economics
(c) microeconomics
(b) positive economics
(d) macroeconomics

(d) macroeconomics

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Which of the following statements is (are) true?
(a) All food and beverage products are normal goods.
(b) One out of every ten jobs in the U.S. economy is tied to the food and fiber industry.
(c) U.S. farms tend to be specialized rather than diversified in that about half of the U.S. farms
produce just one commodity.
(d) Both (a) and (c).

(c) U.S. farms tend to be specialized rather than diversified in that about half of the U.S. farms
produce just one commodity.

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Which of the following is not true?

(a) The own-price elasticity is always negative.
(b) Productivity in the farm sector has increased dramatically over the past 50 years.
(c) The share of total farm receipts earned by the largest farms has been increasing during the past two decades.
(d) None of the above (that is, all statements are true).

(d) None of the above (that is, all statements are true).

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Which of the following statement(s) is (are) false?

(a) The U.S. economy represents a purely capitalistic system.
(b) The current U.S. Secretary of Agriculture is Tom Vilseck.
(c) The index most frequently used by economists to measure inflation is the Consumer Price Index.
(d) None of the above (that is, all statements are true).

(a) The U.S. economy represents a purely capitalistic system.

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Which of the following statements is false?
(a) Agricultural economics is an applied social science.
(b) The rational consumer maximizes satisfaction subject to a budget constraint.
(c) Regardless of the commodity, the farmer always receives 20 cents of the dollar spent in food.
(d) The Latin phrase ceteris paribus means everything else the same or holding all other factors
constant.

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The gross domestic product (GDP) for the U.S. economy in 2012 was roughly $15.8 trillion. What was
the approximate dollar value associated with the food and fiber industry in 2012?
(a) Between $1.5 to $1.8 trillion
(c) Between $2.4 to $2.9 trillion
(b) Between $1.9 to $2.4 trillion
(d) Between $2.9 to $3.5 trillion

(b) Between $1.9 to $2.4 trillion

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Assume that for John Paxton, a soybean producer from Iowa, the only source of farm income is from the production of soybeans. Paxton produced 100,000 bushels of soybeans in 2012, receiving $12 per bushel. Assuming this producer had production expenses of $800,000, and assuming the CPI for 2012
was 2.00, his real farm income for 2012 was:
(a) $400,000
(b) $200,000
(c) $1.2 million
(d) Can’t tell; insufficient information.

(b) $200,000

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The marginal utility of a good (e.g. bananas) declines with increases in the consumption of that good. 
This phenomenon is referred to as the:
(a) Law of Diminishing Marginal Utility
(b) Engel’s Law
(c) Law of Demand
(d) None of the above

(a) Law of Diminishing Marginal Utility

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As a consumer’s income rises, the proportion of income spent on food falls. This assertion is known as:

(a) Law of Demand
(b) Engel’s Law
(c) Law of Diminishing Marginal Utility
(d) None of the above

(b) Engel’s Law

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Suppose the index of prices received by farmers for 2012 was 1.70 and the base year of this index was 1996. Then:

(a) relative to 1996, prices received by farmers were 70% lower in 2012.
(b) relative to 2012, prices received by farmers were 70% higher in 1996.
(c) relative to 1996, prices received by farmers were 70% higher in 2012.
(d) relative to 2012, prices received by farmers were 70% lower in 1996.

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Which of the following statement(s) is (are) true?

(a) The marginal rate of substitution is always negative.
(b) Indifference curves never intersect.
(c) When total utility reaches a maximum, marginal utility is zero.
(d) All of the above

(d) All of the above

Which of the following statement(s) is (are) false?
(a) The slope of any budget line is negative and related to the ratio of the prices of the goods in
question.
(b) The slope of any linear demand curve is the own-price elasticity.
(c) The slope of any indifference curve is the MRS.
(d) None of the above (that is, all statements are true).

(b) The slope of any linear demand curve is the own-price elasticity.

A perfectly elastic demand curve is a ______ line

horizontal

a perfectly inelastic demand curve is a ______ line

vertical

The demand curve for a product shifts to the right. Which of the following statement(s) is (are) a
plausible explanation(s) for this situation?
(a) The price of a competing product decreased.
(b) A successful television advertising campaign was launched by the manufacturer of the product.
(c) Assuming the commodity in question is a normal good, income available to the consumer increased.
(d) (b) and (c).

(d) (b) and (c).

The own-price elasticity for cherries at the farm level is –0.60. Because of the recent freeze in
Washington, cherry production will fall by 12 percent. Cherry prices are likely to:
(a) rise by 20%.
(b) remain the same.
(c) fall by 20%.
(d) can’t tell; insufficient information.

(a) rise by 20%.

Which of the following statement(s) is (are) false?

(a) The concept of elasticity of demand was originated by Alfred Marshall.
(b) Economists do not actually need to measure the level of satisfaction to discern preferences for alternative combinations of goods.
(c) If the change in total utility for apples is 50 utils and the change in consumption of apples is 5 units, then marginal utility is 10.
(d) None of the above (that is, all statements are true).

(d) None of the above (that is, all statements are true).

Suppose that the own-price elasticity for Ragu spaghetti sauce is –1.25. Which of the following
statements is (are) true?
(a) A 4% increase in price leads to a 5% decrease in quantity demanded.
(b) A 10% decrease in price leads to an 8% increase in quantity demanded.
(c) The demand for Ragu spaghetti sauce is unitary elastic.
(d) None of the above.

(a) A 4% increase in price leads to a 5% decrease in quantity demanded.

Assume that for a given consumer, the marginal utility of wine is 100 and the price of wine is $60. Also, assume that the marginal utility of lobster is 200 and the price of lobster is $100. This consumer: (a) is in equilibrium (b) should buy more wine (c) should buy more lobster (d) can’t tell; insufficient information given to answer the question.

Which of the following statement(s) is (are) false? (a) As the quantity of any good increases, total utility must eventually decrease. (b) The own-price elasticity of demand is a unitless measure. (c) To economists, the word “marginal” means change. (d) (a) and (b).

(a) As the quantity of any good increases, total utility must eventually decrease.

In a recent article in USA Today, the price of gasoline rose over the past year from $3.50 to $4.00, a price hike of about 14.29 percent. Gasoline consumption over the past year declined by 10 percent. So, on the basis of this article, we can conclude that: (a) the own-price elasticity for gasoline is -1. (b) the own-price elasticity for gasoline is nearly -0.70. (c) the own-price elasticity for gasoline is roughly -1.43. (d) can’t tell; insufficient information.

(b) the own-price elasticity for gasoline is nearly -0.70.

Which branch of economics is concerned with the activities of U.S. agricultural producers? (a) normative economics (c) positive economics (b) microeconomics (d) macroeconomics

(b) microeconomics

The value of any index for the base period is (a) -1 (c) 1 (b) 0 (d) none of the above

Most resources are best suited for a particular use. For example, climate and other conditions in Florida allow resources to be used in orange production in lieu of wheat or potato production. What economic concept deals with this issue? (a) specialization (c) fallacy of composition (b) opportunity cost (d) none of the above

(a) specialization

The budget line does not depend on: (a) income (b) the prices of the goods in question (c) the preferences for the respective goods (d) none of the above

Which of the following is (are) part of the agribusiness (food and fiber) sector? (a) wholesalers, retailers, and food service purveyors (b) farm input suppliers (c) processors and manufacturers (d) all of the above

(d) all of the above

The major component of all activities once a crop, livestock, or fiber product leaves the farm gate is: (a) packaging and transportation (b) labor (c) advertising (d) none of the above

(b) labor

Changes in taste and preferences refer to changes in: (a) composition of the population. (b) attitudes toward nutrition and health. (c) attitudes toward food safety. (d) all of the above.

(d) all of the above.

We do not need to actually measure the level of satisfaction derived by a consumer from the consumption of goods. We only need a ranking among the alternative consumption bundles. Thus utility is a(n) ______ concept.

ordinal

The portion of food expenditures associated with activities of firms beyond the farm gate is known as: (a) consumer surplus (c) value added (b) the marketing bill (d) none of the above

(b) the marketing bill

Which of the following is the BEST example of an inferior good? (a) Premium beer (c) Kool-Aid (b) Vintage California wine (d) Vintage French champagne

_______________ refers to the implicit cost associated with the next best alternative in a set of choices available to decision-makers. (a) Specialization (b) Opportunity cost (c) Resource scarcity (d) none of the above

(b) Opportunity cost

The term “real” as opposed to “nominal” means that economists are making adjustments for (a) opportunity cost (c) resource scarcity (b) inflation (d) none of the above

(b) inflation

``` The mathematical representation of the satisfaction a consumer derives from a bundle of goods is called the ___________________. (a) indifference curve (b) utility function (c) Engel curve (d) demand curve ```

(b) utility function

Which of the following statements is (are) true? (a) The current debt level for the U.S. economy is nearly $17 trillion. (b) For a linear demand curve, the own-price elasticity is constant for each price/quantity point. (c) Another term for elasticity is sensitivity. (d) (a) and (c).

(d) (a) and (c).