Intro to Food and Resource Economics Study Guide 1
Intro to Food and Resource Economics Study Guide 1 2713
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This 12 page Study Guide was uploaded by Taylor Baker on Thursday September 1, 2016. The Study Guide belongs to 2713 at Mississippi State University taught by Danny Barefield in Fall 2016. Since its upload, it has received 144 views. For similar materials see Intro to Food & Resource Econ in agricultural economics at Mississippi State University.
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Date Created: 09/01/16
Intro to Food and Resource Economics Study Guide Test: September 8, 2016 Chapters 1,2,3,4 TERMS: ______ Scarcity A. the property of distributing economic prosperity uniformly among society’s members. ______ Economics B. a situation in which the market fails to allocate resources efficiently ______ Efficiency C. limited resources and unlimited wants ______ Equality D. the amount of goods and services produced from each unit of labor input ______ Opportunity Cost E. the case in which there is only one seller in the market ______ Rational F. the property of society getting the most from its scarce resources ______ Marginal Change G. an economic system where interaction of households and firms in markets determines the allocation of resource ______ Incentive H. when one person’s actions have an impact on a bystander ______ Market Economy I. an increase in the overall level of prices ______ Market Failure J. an incremental adjustment to an existing plan ______ Externality K. study of how society manages its scarce resources ______ Market Power L. whatever is given up to to get something else ______ Monopoly M. the ability of an individual of group to substantially influence market prices ______ Productivity N. something that induces a person to act ______ Inflation O. systematically and purposefully doing the best you can to achieve your objectives ______ scientific method P. inputs such as land, labor and capital ______ economic Q. the study of economywide phenomena models ______ circularflow R. objective development and testing of theories diagram ______ factors of S. description for how the would ought to be production ______ production T. description for how the world is possibilities frontier microeconomics U. simplifications of reality based on assumptions macroeconomics V. a graph that shows the combinations of output the economy can possibly produce given the available factors of production and the available production technology positive statements W. the study of how households and firms make decisions and how they interact in markets normative statements X. diagram of the economy that shows the flow of goods and services, factors of production, and monetary payments between households and firms absolute advantage Y. the ability to produce a good at a lower opportunity cost than another producer comparative advantage Z. goods produced domestically and sold abroad gains from trade AA. goods produced abroad and sold domestically imports BB. the ability to produce a good using fewer inputs than another producer exports CC. the increase in total production due to specialization allowed by trade market DD. the quantity supplied and the quantity demanded at the equilibrium price competitive market EE. a table that shows the relationship between the price of a good and the quantity demanded quantity demanded FF. a table that shows the relationship between the price of a good and the quantity supplied law of demand GG. two goods for which an increase in the price of one leads to an increase in the demand for another demand schedule HH. a group of buyers and sellers of a particular good or service demand curve II. a good for which, other things equal, an increase in income leads to a decrease in demand normal good JJ. a situation in which quantity demanded is greater than quantity supplied inferior good KK. a situation in which quantity supplied is greater than quantity demanded substitutes LL. the amount of a good that buyers are willing and able to purchase complements MM. a situation in which the price has reached the level where quantity supplied equals quantity demanded quantity supplied NN. a market in which there are many buyers and sellers so that each has a negligible impact on the market price law of supply OO. the claim that, other things equal, the quantity demanded of a good falls when the price of a good rises supply schedule PP. a graph of the relationship between the price of a good and the quantity demanded supply curve QQ. the price that balances quantity supplied and quantity demanded equilibrium RR. the amount of a good that sellers are willing and able to sell equilibrium price SS. the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises equilibrium quantiTT. the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance surplus UU. two goods for which an increase in the price of one leads to a decrease in the demand for the other shortage VV. a good for which, other things equal, an increase in income leads to an increase in demand law of supply and WW. a graph of the relationship between the price of a good and the demand quantity supplied SHORT ANSWER: 1. What is the opportunity cost of saving some of your paycheck? ____________________________________________________ ____________________________________________________ _________________________________________________ 2. why is there a trade off between equality and efficiency? ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ 3. water is necessary for life. Diamonds are not. is the marginal benefit of an additional glass of water greater or lesser than an additional onecarat diamond? why? ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ 4. if the government printed twice as much money, what do you think would happen to prices and output if the economy were already producing at maximum capacity? ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ 5. who is more selfinterested, the buyer or the seller? ________________________________________________ ________________________________________________ ________________________________________________ 6. why is the PPF bowed outward? ________________________________________________ ________________________________________________ ________________________________________________ likely to be a building block of the other? why?which is more ________________________________________________ ________________________________________________ ________________________________________________ 8. when an economist makes a normative statement, are they acting as a scientist or a policy adviser? Why? ________________________________________________ ________________________________________________ ________________________________________________ 9. name two reasons why economists disagree. ________________________________________________ ________________________________________________ ________________________________________________ 10. why do people choose to become interdependent as opposed to self sufficient? ________________________________________________ ________________________________________________ ________________________________________________ 11. why is comparative advantage important in determining trade instead of absolute advantage? ________________________________________________ ________________________________________________ ________________________________________________ 12. what are the two main characteristics of a perfectly competitive market? ________________________________________________ ________________________________________________ 13. what are the variables that should affect the amount of a good consumers wish to buy, other than price? what are the variables that should affect the amount of a good consumers wish to sell, other than price? ________________________________________________ ________________________________________________ ________________________________________________ 14. suppose suppliers of corn expect the price of corn to rise in the future. how would this affect the supply and demand for corn and the equilibrium price and quantity of corn? ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ 15. if there is a surplus of a good is the price above or below the equilibrium price for that good? ________________________________________________ TRUE/FALSE: 1 ______ when economists say, “there ain’t no such thing as a free lunch,” they mean that all economic decisions involve tradeoffs. 6. ______ Rational people only act when the marginal benefit of the action exceeds the marginal cost. 7. ______ a tax on a good raises the price of that good and provides incentive for consumers to consume more of that good. 8. ______ to a student, the opportunity cost of going to a football game would include the price of the ticket and the value of the time that could have been spent studying. 9. ______ if an economy is operating on its own production possibilities frontier, it must be using its resources efficiently. 10. ______ points outside the PPF are attainable but not efficient. 11. ______ the statement, “an increase in inflation tends to cause unemployment to fall in the short run” is normative. 12. ______ when economists make positive statements, they are more likely acting as a scientist. 13. ______ if Japan has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item. 14. ______ if a producer is selfsufficient, the PPF is also the consumption possibilities frontier. 15. ______ if a country’s workers can produce 5 hamburgers per hour or 10 bags of fries per hour, absent trade, the price of 1 bag of fries is 2 hamburgers. 16. ______ if trade benefits one country, its trading partner must be worse off due to trade. 17. ______ when a country removes a specific import restriction, it always benefits every worker in that country. 18. ______ a perfectly competitive market consists of products that are all slightly different from one another. 19. ______ if golf clubs and golf balls are complements, an increase in the price of gold clubs will decrease the demand for golf balls. 20. ______ if CocaCola and Pepsi are substitutes, an increase in the price of CocaCola will cause an increase in the equilibrium price and quantity in the market for Pepsi. MULTIPLE CHOICE: 1 which of the following involve a tradeoff? a. buying a new car b. going to college c. taking a nap d. all of the above 2. tradeoffs are required because wants are unlimited and resources are a. efficient b. economical c. scarce d. marginal 3. economics is the study of how a. to fully satisfy our unlimited wants b. society manages its scarce resources c. to avoid having to make tradeoffs d. society manages its unlimited resources 4. a rational person does not act unless a. the action makes money for the person b. the action produces marginal costs that exceed marginal benefits c. that action produces marginal benefits that exceed marginal costs d. none of the above is true 5. productivity can be increased by a. raising minimum wages b. raising union wages c. improving the education of workers d. restricting trade wit foreign countries 6. the scientific method requires that a. scientists use test tubes and have clean labs b. scientists be objective c. scientists use precision equipment d. only incorrect theories are tested 7. points on the PPF are a. efficient b. inefficient c. attainable d. normative 8. which of the following statements is normative a. printing too much money is causing inflation b. people work harder if the wage is higher c. the unemployment rate should be lower d. large government deficits cause an economy to grow more slowly 9. positive statements are a. microeconomic b. macroeconomic c. statements of prescription that involve value judgements d. statements of description that can be tested 10. if a nation has an absolute advantage in the production of a good, a. it can produce that good at a lower opportunity cost than its trading partner. b. it can produce that good using fewer resources than its trading partner. c. it can benefit by restricting imports of that good. d. it will specialize in the production of that old and export it. 11. which of the following statements is true a. selfsufficiency is the road to prosperity in most countries b. a selfsufficient country consumes outside its PPF c. a selfsufficient country at its best can consume on its PPF d. only countries with an absolute advantage in the production of every good should strive to be self sufficient 12. suppose a countries workers can produce 4 watches and 12 rings per hour. if there is no trade, a. the domestic price of one ring is 3 watches b. the domestic price of one ring is 1/3 of a watch c. the domestic price of one ring is 4 watches d. the domestic price of one ring is 1/4 of a watch 13. if an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are a. substitutes b. compliments c. normal goods d. inferior goods 14. if an increase in consumer incomes leads to a decrease in the demand for camping equipment, then campaign equipment is a. a complimentary good b. a substitute good c. a normal good d. an inferior good 15. if the price of a good is below the equilibrium price, a. there is a surplus, and the price will rise b. there is a surplus, and the price will fall c. there is a shortage, and the price will rise d. there is a shortage, and the price will fall 16. an increase (rightward shift) in the demand for a good will tend to cause a. an increase in the equilibrium price and quantity b. a decrease in the equilibrium price and quantity c. an increase in the equilibrium price and a decrease in the equilibrium quantity d. a decrease in the equilibrium price and an increase in the equilibrium quantity ANSWERS: TERMS: C. scarcity K. economics F. efficiency A. equality L. opportunity cost O. rational J. marginal change N. incentive G. market economy B. market failure H. externality M. market power E. monopoly D. productivity I. inflation R. scientific method U. economic models X. circularflow diagram P. factors of production V. production possibilities frontier W. microeconomics Q. macroeconomics T. positive statements S. normative statements BB. absolute advantage Y. comparative advantage CC. gains from trade AA. imports Z. exports HH. market NN. competitive market LL. quantity demanded OO. law of demand EE. demand schedule PP. demand curve VV. normal good II. inferior good GG. substitutes UU. compliments RR. quantity supplied SS. law of supply FF. supply schedule WW. supply curve MM. equilibrium QQ. equilibrium price DD. equilibrium quantity KK. surplus JJ. shortage TT. law of supply and demand SHORT ANSWER: 1 the items you could have enjoyed had you spent that portion of your paycheck (current consumption) 21. taxes and welfare make us more equal but reduce incentives for hard work, lowering total output 22. the marginal benefit of another glass of water is generally lower because we have so much water that one more glass is of little value. the opposite is true for diamonds. 23. spending would double, but since the quantity of output would remain the same, prices would double. 24. they are equally selfinterested. the seller will sell to the highest bidder, and the buyer will buy from the lowest offer. 25. because resources are specialized and, thus, are not equally well suited for producing different outputs. 26. microeconomics and macroeconomics. microeconomics is more of a building block of macroeconomics because when we address macro issues (for example: unemployment) we have to consider how individuals respond to work incentives such as wages and welfare. 27. as a policy advisor because normative statements are prescriptions about what ought to be and are somewhat based on value judgements. 28. economists may have different scientific judgements. economists may have different values. 29. because a consumer gets a greater variety of goods at a much lower cost than they could produce by themselves. that is, there are gains from trade. 30. what is important in trade and how a country’s costs without trade differ from each other. this is determined by the relative opportunity costs across countries. 31. the goods offered for sale are the same and the buyers and sellers are so numerous that no one buyer or seller can influence the price 32. population, income, prices of other goods, tastes, and expectations; input prices, technology, expectations, and population 33. the supply of corn in today’s market would decrease (shift left) as sellers hold back their offerings in anticipation of greater profits if the price rises in the future. if only the suppliers expect higher prices, demand would be unaffected. the equilibrium price would rise and the equilibrium quantity would fall. 34. the price must be above the equilibrium price TRUE/FALSE: 1 T 35. T 36. F; higher prices reduce the quantity demanded 37. T 38. T 39. F; points outside the PPF cannot yet be attained 40. F; this statement is positive 41. T 42. F; absolute advantage compares the quantities of inputs used in production while comparative advantage compares the opportunity costs 43. T 44. F; the price of one bag of fries is 1/2 of a hamburger 45. F; voluntary trade benefits both traders 46. F; it may have harmed those involved in that industry 47. F; a perfectly competitive market consists of goods offered for sale that are exactly the same 48. T 49. T MULTIPLE CHOICE: 1 d 50. c 51. b 52. c 53. c 54. b 55. a 56. c 57. d 58. b 59. c 60. b 61. a 62. d 63. c 64. a
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