Ag Economics exam 5 - Assignment Essays

Q: When would the firm's decision to stop production be a sound economic decision in the short run?

This would be a sound decision when the producer cannot cover AVC (AVC does not cover MR)

Q: On a per unit basis economic profit can be stated as the difference between

Average total cost and product price

question

The minimum price at which a producer will offer a product for sale in the short-run is equal to the minimum ___________ ____________ _______.

answer

Average variable cost

question

Which of the following is a fixed cost?

answer

Interest cost for debt on trucks and equipment

question

The profit maximizing amount of output to use is that amount where the cost of the last unit produced is equal to its market price.

answer

True

question

As output is increased, total fixed cost will:

answer

Remain constant

question

The time period which is adequate for the firm to be able to vary some but not all quantities of resources in use is:

answer

The short run

question

The competitive firm's individual supply curve for an output is:

answer

Its MC curve in Stage II only

question

In analyzing the farm business, labor should be considered:

answer

A variable cost

question

IF Py=MR=ATC=MC, the firm's profit=0.

answer

True

question

Define opportunity cost

answer

The value of alternative opportunities forgone

question

Name two factors that can result in a change (shift) in the market supply curve for an agricultural commodity.

answer

1. Climate

2.Improvement in technology

question

In the short-run, average fixed cost (AFC) is constant for all levels of output.

answer

False

question

The behavior of the competitive firm's MC curve is determined by the marginal physical product (MPP) curve derived from the production function.

answer

True

question

A competitive firm's short-run supply decision should be to stop production if

answer

MR<AVC

question

A competitive firm's total fixed cost is $400.00 and its variable cost is $15.00 per unit of input, what is its total cost when using 10 unit of a variable input and produces 100 units of output?

compute the above firm's ATC at the output level specified above.

answer

$550

$5.50

question

When would the firm's decision to stop production be a sound economic decision in the short run?

answer

This would be a sound decision when the producer cannot cover AVC (AVC does not cover MR)

question

On a per unit basis economic profit can be stated as the difference between

answer

Average total cost and product price

question

Define Elasticity of Supply

answer

...

question

Total Revenue (TR)=:

answer

Output * Py

question

The material in our current chapter 6, would be considered microeconomics or macroeconomics

answer

Microeconomics

question

Why are supply elasticities for most raw agricultural commodities so inelastic in the short run?

answer

...

question

Define explicit costs

answer

...

question

Define implicit costs

answer

No cash cost/value

question

The market price of a good must be above minimum ATC if the firm is to earn economic profit

answer

True

question

The equilibrium price of a good will increase more if the demand curve shifts to the right and supply curve is more,

answer

Inelastic

question

Total variable cost will always increase as the firm's output is increased ceteris parabus.

answer

True

question

How are equilibrium prices determined in the market place?

answer

By supply and demand

question

If the price of an agricultural commodity is set below the equilibrium market price, the demand will be greater than the supply resulting in a:

answer

Shortage

question

The two basic types of information required to develop analysis for determining an economic optimum is _____________________ data and ____________________ data.

answer

Marginal substitute rate (MSR) and input price ratio (IPR)

question

Marginal revenue is the added revenue from:

answer

Selling an additional unit of your output

question

If quantity supplied changes by 2 percent in response to a 1 percent change in the price of the good, the measured supply elasticity is equal to

answer

2.0

question

Why is it important for a producer to compute his costs of production per unit output?

answer

It is important because he needs to compare his costs to market price

question

The measures of firm cost, AFC AVC ATC and MC are each computed by dividing by ______________ in the denominator

answer

Output

question

List the sources of fixed costs that combine to make total fixed costs.

answer

Depreciation

insurance

repair

taxes

interest

question

As production output increases in the short-run, Average Fixed Cost will (increase, decrease, or stay constant) ______________.

answer

Decrease

1 of 34

question

The minimum price at which a producer will offer a product for sale in the short-run is equal to the minimum ___________ ____________ _______.

answer

Average variable cost

question

Which of the following is a fixed cost?

answer

Interest cost for debt on trucks and equipment

question

The profit maximizing amount of output to use is that amount where the cost of the last unit produced is equal to its market price.

answer

True

question

As output is increased, total fixed cost will:

answer

Remain constant

question

The time period which is adequate for the firm to be able to vary some but not all quantities of resources in use is:

answer

The short run

question

The competitive firm's individual supply curve for an output is:

answer

Its MC curve in Stage II only

question

In analyzing the farm business, labor should be considered:

answer

A variable cost

question

IF Py=MR=ATC=MC, the firm's profit=0.

answer

True

question

Define opportunity cost

answer

The value of alternative opportunities forgone

question

Name two factors that can result in a change (shift) in the market supply curve for an agricultural commodity.

answer

1. Climate

2.Improvement in technology

question

In the short-run, average fixed cost (AFC) is constant for all levels of output.

answer

False

question

The behavior of the competitive firm's MC curve is determined by the marginal physical product (MPP) curve derived from the production function.

answer

True

question

A competitive firm's short-run supply decision should be to stop production if

answer

MR<AVC

question

A competitive firm's total fixed cost is $400.00 and its variable cost is $15.00 per unit of input, what is its total cost when using 10 unit of a variable input and produces 100 units of output?

compute the above firm's ATC at the output level specified above.

answer

$550

$5.50

question

When would the firm's decision to stop production be a sound economic decision in the short run?

answer

This would be a sound decision when the producer cannot cover AVC (AVC does not cover MR)

question

On a per unit basis economic profit can be stated as the difference between

answer

Average total cost and product price

question

Define Elasticity of Supply

answer

...

question

Total Revenue (TR)=:

answer

Output * Py

question

The material in our current chapter 6, would be considered microeconomics or macroeconomics

answer

Microeconomics

question

Why are supply elasticities for most raw agricultural commodities so inelastic in the short run?

answer

...

question

Define explicit costs

answer

...

question

Define implicit costs

answer

No cash cost/value

question

The market price of a good must be above minimum ATC if the firm is to earn economic profit

answer

True

question

The equilibrium price of a good will increase more if the demand curve shifts to the right and supply curve is more,

answer

Inelastic

question

Total variable cost will always increase as the firm's output is increased ceteris parabus.

answer

True

question

How are equilibrium prices determined in the market place?

answer

By supply and demand

question

If the price of an agricultural commodity is set below the equilibrium market price, the demand will be greater than the supply resulting in a:

answer

Shortage

question

The two basic types of information required to develop analysis for determining an economic optimum is _____________________ data and ____________________ data.

answer

Marginal substitute rate (MSR) and input price ratio (IPR)

question

Marginal revenue is the added revenue from:

answer

Selling an additional unit of your output

question

If quantity supplied changes by 2 percent in response to a 1 percent change in the price of the good, the measured supply elasticity is equal to

answer

2.0

question

Why is it important for a producer to compute his costs of production per unit output?

answer

It is important because he needs to compare his costs to market price

question

The measures of firm cost, AFC AVC ATC and MC are each computed by dividing by ______________ in the denominator

answer

Output

question

List the sources of fixed costs that combine to make total fixed costs.

answer

Depreciation

insurance

repair

taxes

interest

question

As production output increases in the short-run, Average Fixed Cost will (increase, decrease, or stay constant) ______________.

answer

Decrease

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