Essay Question For Principles of Agricultural Economics, 4th Edition By Andrew Barkley, Paul W. Bark

Essay Question For Principles of Agricultural Economics, 4E By Andrew Barkley, Paul W. Barkley Chapter 1-16 CHAPTER 1.

1. Define the term, “scarcity,” and explain why scarcity is the fundamental problem of economics.

2. Explain how economists use the concept of ceteris paribus.

3. Briefly explain how resources are allocated in: (a) a market economy, and (b) a command economy.

4. Draw a circular flow diagram of a mixed economy.

5. Agricultural commodity prices constantly fluctuate. Write an essay on who benefits, who loses, and indirect effects of price movements of wheat, corn, soybeans, etc. What determines the fluctuations?

6. Many claim that globalization leads to job loss for American workers. Write an essay on the strengths and weaknesses of this claim. Is globalization and trade good for agriculture? Explain your arguments carefully.

7. Write an essay that explains the phrase, “scarcity forces us to choose.” Why is scarcity the fundamental idea behind economics? Explain thoroughly and completely.

8. Write an essay that explains the difference between scarce and nonscarce goods.

Define and explain all terms.

9. Write an essay that explains the difference between absolute and relative prices. Define and explain all terms.

10. Graph the demand curve for beef, P= 200 – 2Q, where P is the price of beef in dollars per cwt and Q is the quantity of beef demanded in million cwt. Describe what this curve means.

CHAPTER 2.

1. Define the term, “production function.”

2. Write a mathematical relationship for wheat production. Define all variables.

3. Suppose that a veterinary researcher would like to understand the impact of growth hormones on horse health. Describe using math and words how the researcher would set up this experiment.

4. Explain how we would know if a wheat farm in North Dakota is in the short run or the long run.

5. How many years will it take for a beef producer to be in the long run? Explain.

6. Suppose that the production function for wheat is characterized by the following data: X =labor (hours) 0 1 2 3 4 5 6 7

Y=wheat (bil bu) 0 10 40 81 112 120 120 105

A. Define the term, “production function” and explain the usefulness of studying production.

B. Define and explain the terms, TPP, APP, and MPP. C. Complete a chart that includes TPP, APP, and MPP. D. Complete a graph of TPP, APP, and MPP. 7. Suppose that the input (X) wheat (bu), is ground into output (Y) flour (lbs) at a flour mill. Use the data for X and Y to calculate TPP, APP, and MPP in the chart below.

Write the units for X, Y, TPP, APP, and MPP below.

X 0 1 2 3 4 5

Y 0 100 400 600 640 600

8. Graph TPP, APP, and MPP. Be sure to include labels and units.

9. Identify the three stages of production in the graph above.

10. State and explain the relationship between average and marginal productivity.

11. Identify the point on the TPP graph where diminishing returns begin.

12. Define the Law of Diminishing Returns, and explain the real world implications.

13. Define and explain the term, “ceteris paribus.” Science is also called, “reductionism.” Explain what this means. Given the complexity of the real world, doesn’t economics make too many assumptions to be useful? Carefully explain why or why not.

14. Use McDonalds as an example to define and explain the terms, “immediate run,” “short run,” and “long run.”

15. Write an essay and use a graph to define and explain the three stages of production.

Use a real-world example from your own life to demonstrate how these stages can be used to help us understand the human condition.

16. Write an essay and use a graph to define and explain technological change. Find a real-world example of technological change from the history of food and agriculture.

Write an essay on the role of technological change on the history of humankind. How important will technological change be in the future? Carefully explain your examples and positions.

17. Suppose that nitrogen (lbs) is used to produce corn (bu) on a farm. The price of nitrogen is PX=$4/lb, and the price of corn is PY=$2/bu. Use the data for X and Y to complete the table below, including units.

X 0 1 2 3 4 5 6 7

Y 0 5 20 45 60 70 72 63

TPP

APP

MPP

TRP

TFC

Π

MRP

MFC

18. Graph TPP, APP, and MPP from question 17. Be sure to include labels and units.

CHAPTER 3.

1. Define profits, and explain what each term in the definition refers to.

2. Explain why a firm may desire to not maximize output.

3. Many agricultural producers have a business objective of maximizing yield per acre.

Analyze this objective carefully and completely. Use a graph to demonstrate the outcome of this objective.

4. Is it possible for a firm to have zero economic profits and positive accounting profits?

Explain why or why not.

5. Explain why the total cost curve is shaped the way that it is.

6. Graph the cost structure for an electricity company.

7. An ethanol plant purchases X = corn (bu) and produces ethanol Y = ethanol (gal).

PX = $6/bu TFC = $1 PY = $2/gal Y 0 1 2 3 4 5 6

TVC 0 2 2.6 3 4 6 12

A. Complete the cost chart to include all costs.

B. Give an example of a fixed cost for the ethanol plant; explain why it is fixed.

C Give an example of a variable cost for the ethanol plant; explain why it is variable.

D. Define opportunity costs and describe the ethanol plant’s opportunity costs.

E. Do costs in the table above include opportunity costs? Explain.

8. Define and explain the term, “opportunity cost.”

A. Use the concept to explain birth rates across nations.

B. Use the concept to explain why most (but not all) college students are young, pre- career, pre-children.

C. Use the concept to explain why some people are teachers, even though the salaries are low relative to other professions.

D. Give a good example of how the concept of opportunity cost affects you and your decision making.

9. Define and explain: TC, TFC, TVC, ATC, AVC, and MC.

10. Suppose that the fixed costs for a wheat farm are equal to $10, and variable costs are given in the chart: Y = wheat (mt) 0 1 2 3 4 5 6

TVC($) 0 20 36 45 60 80 120

A. Explain what the fixed costs are for the wheat farm.

B. Explain what the variable costs are for the wheat farm.

C. Complete a chart that includes: Y, TC, TFC, TVC, ATC, AVC, and MC. D. Are opportunity costs included in these costs?

E. Complete a graph of Y, TC, TFC, TVC, ATC, AVC, and MC. 11. Write a description of: A. A constant cost firm B. A decreasing cost firm C. An increasing cost firm.

Give an example of each.

12. Describe the relationship between: A. Physical product curves and cost curves, and B. Average and marginal costs.

CHAPTER 4.

1. Below is the production function for a flour mill, where the input is grain (X = wheat), in bushels (bu) and the output is flour (Y = flour), in pounds (lb). PX = $5/bu, PY = $2/lb.

X 0 1 2 3 4 5 6

Y 0 10 30 60 80 90 84

A. What is the flour mill’s objective as a business firm and in completing this chart?

B. Explain how the flour mill would identify the profit-maximizing level of input, and state what that level is.

C. If the wage rate (PX) increased, would the flour mill hire more or fewer workers?

Explain why.

D. If the price of plants (PY) increased, would the flour mill hire more or fewer workers?

Explain why.

2. Draw a graph for TRP, TFC, MRP, and MFC. Be sure to include labels and units.

Identify the profit-maximizing level of input in the graphs.

3. A greenhouse purchases X = seeds (lbs) and plants them to produce Y = flowers (flowers). PX = $60/lb TFC = $10 PY = $20/flower Y 0 1 2 3 4 5 6

TVC 0 20 26 30 40 60 120

A. Complete the cost chart to include all costs.

B. Give an example of a fixed cost for the greenhouse; explain why it is fixed.

C Give an example of a variable cost for the greenhouse; explain why it is variable.

D. Define opportunity costs and describe the greenhouse’s opportunity costs.

E. Do costs in the table above include opportunity costs? Explain.

F. What is the profit-maximizing level of output? Explain.

G. Identify the shut down (SD) and break even (BE) points in the chart.

H. Briefly explain why the greenhouse might stay in business if SD<PY<BE. H. Briefly state the relationship between average and marginal costs.

4. Graph TC, TVC, TFC, ATC, AVC, and MC. Identify the shut down and break even points in the graph.

5. List and briefly explain the four conditions of perfect competition.

6. Why do we assume perfect competition in our study of profit-maximization?

7. Explain “marginal decision making,” why it is important, and how it is done.

8. Write an essay that defines and explains the concept of, “perfect competition.”

9. Select a real-world firm, and carefully explain which characteristics of perfect competition are met by the firm, and which are not.

10. Define and explain the terms: TRP, ARP, MRP, TFC, and MFC. 11. Suppose that a steakhouse purchases natural beef (X=meat, in lbs) and uses it to produce steak dinners (Y=dinners, in no. of meals), as shown in the chart below. The price of meat (Px) is $20/lb, and the price of steak dinners (Py) is equal to $10/meal. Use a chart to find the profit-maximizing level of natural beef for the firm to purchase.

X = meat (lbs) 0 1 2 3 4 5 6 7

Y=dinners (meals) 0 1 6 10 13 15 16 15

12. Beef that is produced with antibiotics and hormones is much cheaper than natural beef. Would the firm make more profits using conventional meat from a feedlot?

Discuss and explain.

13. Many individuals and groups argue that we should reduce our consumption of oil and petroleum products. One proposed policy is to tax gasoline. Use a graph to show the impact of a tax on gasoline on the level of usage. How high would the tax have to be to reduce consumption?

14. Define and explain the terms: TR, TC, MR, and MC. 15. Suppose that a wheat farm has total fixed costs (TFC) equal to $20, and the price of seed wheat (Py) is equal to $14/bu. Use a chart to find the profit-maximizing level of seed wheat for the farm to produce.

Y = seed wheat (bu) 0 1 2 3 4 5 6

TVC ($) 0 10 16 18 22 36 60

16. Use a graph to demonstrate why a firm might remain in business if it had negative economic profits. Be sure to explain the graph carefully and completely.

17. Suppose that a wheat farm has total fixed costs (TFC) equal to $10, and the price of wheat (Py) is equal to $14/bu. Use a chart to find the profit-maximizing level of wheat for the farm to produce.

Y 0 1 2 3 4 5 6 7

TVC 0 10 16 18 22 36 58 84

TFC

TC

ATC

AVC

MC

TR

AR

MR

Π

A. Give an example of a fixed cost for the wheat farm; explain why it is fixed.

B. Give an example of a variable cost for the wheat farm; explain why it is variable.

C. Define opportunity costs and describe the farmer’s opportunity costs.

D. Do costs in the table above include opportunity costs? Explain.

E. Explain why the total cost curve is shaped the way that it is.

F. Briefly state the relationship between average and marginal costs.

G. What is the profit-maximizing level of output? What is the maximum level of profits that the farm can earn?

H. What is the breakeven price? What is the breakeven quantity?

I. What is the shut down price? What is the shut down quantity?

J. What happen to fixed costs in the long run? What are the break even and shut down points in the long run?

K. Graph TC, TVC, TFC, ATC, AVC, and MC. Include labels and units.

CHAPTER 5.

1. Sugar (=X1, in oz) and flour (=X2, in lbs) are used to produce bread (loaves). The price of sugar is P1=$5/oz, and the price of flour is P2=$2/lb. Expenditures for this bakery are equal to $100. Graph the isocost line for this bakery.

2. Define and explain what an isoquant is.

3. Define and explain what an isocost line is.

4. Draw an isoquant in the graph above, and show an equilibrium point.

5. If the price of flour (P2) decreased to $1/lb, draw a graph to show how the equilibrium will change, if expenditure is constant. Will the bakery purchase more or less flour?

Will the bakery purchase more or less sugar? Explain why.

6. Graph the change in equilibria from the flour price increase, assuming that the bakery wants to maintain the same level of output.

7. Graph isoquants and give an example for: A. Perfect substitutes, B. Perfect complements, and C. Imperfect substitutes.

Explain how relative price changes affect purchases of each type of input 8. Define and explain what an isoquant is.

9. Use graphs to demonstrate perfect substitutes and perfect complements. Give a realworld example of each.

10. Define and explain MRTS carefully.

11. Define and explain what an isocost line is.

12. Use graphical analysis to show the impact of the large increase in the price of oil on the use of: A. Petroleum products, and B. Alternative energy sources.

13. Use graphical analysis to demonstrate the impact of an increase in the price of corn relative to the price of wheat. Find evidence that shows whether the predictions of the graph have occurred in the US or not.

14. Flour (=X1, in lbs) and sugar (=X2, in lbs) are used to produce cookies (doz). The price of flour is P1=$1/lb, and the price of sugar is P2=$2/lb. Expenditures for the firm are equal to $20. Graph the isocost line, isoquant, and equilibrium for the cookie firm.

A. If the price of sugar (P2) decreased to $1/lb, draw a graph to show how the equilibrium will change. Will the firm hire more or fewer workers? Explain why.

B. Graph the optimal combination of the outputs Y1 = peanut butter cookies (doz) and Y2 = sugar cookies (doz) for the firm, and demonstrate the impact of an increase in the price of sugar cookies on the equilibrium quantity of PB and sugar cookies.

CHAPTER 6.

1. Define the term, “Production Possibilities Frontier.”

2. Define the term, “Isorevenue Line.”

3. Graph the optimal combination of the outputs Y1 = milk (gal) and Y2 = cheddar cheese (lb) for a dairy farmer.

4. Demonstrate the impact of a potential increase in the standard of living in the US on the equilibrium quantity of milk and cheese produced and sold by this dairy farmer.

5. Demonstrate the impact of a (hypothetical) cheese research program in the US Department of Agriculture (USDA) on the optimal output combination.

6. Derive the mathematical equation that represents the output equilibrium.

7. Suppose that this dairy farmer makes good economic decisions. How does a producer “think like an economist?”

8. Use graphs to demonstrate a PPF with: A. Increasing returns, B. Constant returns, and C. Decreasing returns.

Graph and explain a real-world example of each.

9. Define and explain MRPS carefully.

10. Use graphical analysis to show the impact of the large increase in the price of soybeans on the production of: A. Corn, and B. Soybeans.

11. We have been involved with “the economic way of thinking" for several chapters.

Write an essay on the how an economist thinks, and the usefulness of this in: A. Everyday life.

B. Business decisions, and C. Career choice.

CHAPTER 7.

1. Explain why we study consumer behavior.

2. Define the Law of Diminishing Marginal Utility, and explain how it helps us understand human behavior.

3. Define an indifference curve, and list four properties of indifference curves.

4. Define and graph: A. Perfect substitutes, and B. Perfect complements.

Graph and explain how relative prices affect the production of each type of good.

5. Explain MRS. Derive the mathematical equation that represents consumer equilibrium.

6. Define and explain what an economist means by: A. rational, and B. utility.

7. Define and explain what an indifference curve is.

8. Define and explain MRS carefully.

9. Define and explain what a budget line is.

10. Use graphical analysis to show the impact of the following events on consumer choices: A. Gasoline price increase on consumption of gas and hybrid automobiles.

B. Economic recession, caused by the financial sector crisis, on gas and hybrid purchases.

C. Inflation, caused by government policy to deal with the financial sector crisis, on gas and hybrid vehicle purchases.

11. Select an industry that you are interested in, and describe an economist’s advice to the industry, based on consumer theory presented in chapter seven.

12. Charlie purchases burritos (=Y1, in #) and tacos (=Y2, in #). The price of burritos is P1=$5/burrito, and the price of tacos is P2=$4/taco. Weekly income for Charlie is equal to $40. Graph the budget line and opportunity set.

A. Draw an indifference curve in the graph, and show an equilibrium point.

B. Suppose that the price of tacos increases from $4/taco to $6/taco, resulting in the quantity demanded of tacos to decrease from 180 tacos to 160 tacos. What is the point elasticity of demand for tacos? Are tacos elastic or inelastic? Why?

CHAPTER 8.

1. Why do we study supply and demand? Explain thoroughly and carefully.

2. Supply Curve.

A. Define the term, “supply curve.”

B. What does the supply curve represent, intuitively?

C. How is the market supply curve derived?

D. List the determinants of supply.

E. Carefully describe and explain the difference between the movement along and a shift in supply.

3.

A. What is the equation of the cross-price elasticity of supply of beef and pork?

B. What is the sign of the cross-price elasticity of supply of beef and pork?

Explain.

C. What is the equation of the cross-price elasticity of demand of beef and pork?

D. What is the sign of the cross-price elasticity of demand of beef and pork?

Explain.

4. Own-Price Elasticity of Supply (Es).

Suppose that the price of pizza increases from P0=USD 6/pizza to P1=USD 10/pizza, resulting in an increase in pizzas produced from Q0= 10 pizzas to Q1= 12 pizzas.

A. Calculate ε at the initial values of P and Q. B. Is pizza supply elastic or inelastic? Demonstrate and explain.

C. Is the pizza firm in the immediate run, short run, or long run? Explain.

5. Cross-Price Elasticity of Supply (Esxy)..

A. What is the formula and sign of the cross-price elasticity of supply of pizza and bread sticks? Note: assume that the bread sticks are made from left-over pizza dough.

B. What is the formula and sign of the cross-price elasticity of supply of pepperoni pizza and cheese pizza?

6. Consider a competitive market for pork with the quantity supplied (per year) at various prices are given as follows: Price (dollars/kg) 60 80 100 120

Supply (million kg) 8 14 18 22

A. Calculate the price elasticity of supply when the price is USD 80/kg.

B. Calculate the price elasticity of supply when the price is USD 100/kg.

7. Organic vegetables are traded in a competitive world market, and the world price is USD 9/lb. unlimited quantities are available for import into the United States at this price. The U.S. domestic supply for various price levels are shown as follows: Price (USD /lb) 3 6 9 12 15 18

US Supply (million lbs) 2 4 6 8 10 12

A.What is the equation for supply?

B. At a price of USD 9/lb, what is the price elasticity of supply?

C. At a price of USD 12/lb, what is the price elasticity of supply?

8. Write an essay on how economic thinking could help improve your life.

CHAPTER 9.

1. Why do we study supply and demand? Explain thoroughly and carefully.

2. Demand Curve.

A. Define the term, “demand curve.”

B. What does the demand curve represent, intuitively?

C. How is the market demand curve derived?

D. List the determinants of demand.

E. Carefully describe and explain the difference between the movement along and a shift in demand.

3. Suppose that the price of bread increases from usd 1/loaf to usd 2/loaf, resulting in the quantity demanded of bread to decrease from 200 loaves to 160 loaves. What is the arc elasticity of demand for bread? Is bread elastic or inelastic? Why? 4. Demonstrate the best strategy for maximizing profits for the bread company.

5. Demonstrate and explain what will happen to the demand for air tickets over time.

6. Use a graph and an explanation to explain what has happened to the demand for grocery store coupons in the past four to five years. Be sure to include proper economic terminology, elasticity description, and graphs.

7. Use graphs to demonstrate the income elasticity of: A. Steaks, B. Hamburgers, and C. Ramen noodles.

What is the economic significance of this for US agriculture? Explain.

8. Suppose that a beef producer came to you (an economic consultant) and asked for advice on where to sell natural and organic beef in the future. Use your knowledge of income elasticities to explain and demonstrate the best course of action. Be sure to include proper economic terminology, elasticity description, and graphs.

9.

A. What is the equation of the cross-price elasticity of demand of beef and pork?

B. What is the sign of the cross-price elasticity of demand of beef and pork?

Explain.

10. The large increase in US ethanol production has resulted in a large increase in the demand for corn.

A. What is the cause of the “large increase in ethanol production”? Explain.

B. Will increased ethanol production shift the demand curve of wheat in the US? Explain why or why not. (Hint: think about your answer to A. above… what happens to demand for feed grains?)

11. What impact will animal rights laws that cause producers to change their production practices have on the price and quantity of meat? Hint: be careful here… think about both demand and supply.

12. Own-Price Elasticity of Supply (Es).

Suppose that the price of pizza increases from P0=usd 6/pizza to P1=usd 10/pizza, resulting in an increase in pizzas produced from Q0= 10 pizzas to Q1= 12 pizzas.

A. Calculate ε at the initial values of P and Q. B. Is pizza supply elastic or inelastic? Demonstrate and explain.

C. Is the pizza firm in the immediate run, short run, or long run? Explain.

13. Cross-Price Elasticity of Supply (Esxy)..

A. What is the formula and sign of the cross-price elasticity of supply of pizza and bread sticks? Note: assume that the bread sticks are made from left-over pizza dough.

B. What is the formula and sign of the cross-price elasticity of supply of pepperoni pizza and cheese pizza?

14. Consider a competitive market for pork with the quantity demanded (per year) at various prices are given as follows: Price (dollars/kg) 60 80 100 120

Demand (million kg) 22 20 18 16

A. Calculate the price elasticity of demand when the price is usd 80/kg.

B. Calculate the price elasticity of demand when the price is usd 100/kg.

15. Organic vegetables are traded in a competitive world market, and the world price is usd 9/lb. unlimited quantities are available for import into the United States at this price.

The U.S. domestic demand for various price levels are shown as follows: Price (usd /lb) 3 6 9 12 15 18

US Demand (million lbs) 26 22 18 14 10 6

A. What is the equation for demand?

B. At a price of usd 9/lb, what is the price elasticity of demand?

C. At a price of usd 12/lb, what is the price elasticity of demand?

CHAPTER 10.

1. Explain and demonstrate how Walmart has become the most successful retailer ever using simple economic principles.

2. Explain and demonstrate the impact of technological change on: A. The market for wheat, and B. An individual wheat producer in the US. 3. Explain and demonstrate the impact of an increase in the production of biofuels on: A. The market for corn, and B. An individual corn producer in Iowa.

4. Use supply and demand graphs to show the impact of a drought on the equilibrium price and quantity of wheat in France.

5. Use supply and demand graphs to show the impact of China’s increasing standard of living on the price and quantity of feed grains in the US. 6. Does a surplus exist at a price above or below the market equilibrium price? Use a graph to show this. What will happen if a surplus exists?

7. When will a shortage occur in a market? Use a graph to show a shortage. What will happen if a shortage exists?

8. Demonstrate graphically the impact of ethanol on the corn market.

9. Demonstrate graphically the impact of technological change on the grain market.

10. Demonstrate graphically the impact of a drought on the wheat market.

CHAPTER 11.

1. List three types of market failure that justify government intervention.

2. A Price Ceiling on Beef. The inverse demand and supply curves for beef are given by: P = 12 – 0.2Qd and P = 0.2Qs, where P is the price of beef in dollars per pound (USD/lb) and Q is the quantity of beef in million pounds (mil lb). The price ceiling is equal to $5/lb.

A. Explain the purpose of this policy: what is it intended to do?

B. Calculate the equilibrium price and quantity of beef in free markets.

C. Calculate Qs and Qd under the price ceiling.

D. Who is helped and who is hurt by this policy?

3. A Price Support on Wheat. The inverse demand and supply curves for wheat are given by: P = 11 – Qd and P = 1 + Qs, where P is the price of wheat in dollars per bushel

(USD/bu) and Q is the quantity of wheat in million bushels (mil bu). The price support set by the government is equal to $8/bu.

A. Explain the purpose of this policy: what is it intended to do?

B. Calculate the equilibrium price and quantity of wheat in free markets.

C. Calculate Qs and Qd under the price ceiling.

D. Who is helped and who is hurt by this policy?

4. Calculate the changes in producer and consumer surplus for the price ceiling policy in (2) above. Who is made better off, who worse off, and by how much?

5. Calculate the changes in producer and consumer surplus for the price support policy in (3) above. Who is made better off, who worse off, and by how much?

6. Describe the changes in producer and consumer surplus for the immigration in the short run. Who is made better off, who worse off, and by how much?

7. Describe the changes in producer and consumer surplus for the immigration in the long run. Who is made better off, who worse off, and by how much?

8. Define and explain the terms, “Gross Domestic Product” and “National Income.” How are the two terms similar, and how are they different?

9. List and explain three functions of money in a market-based economy.

10. If you are a borrower, are you better off with inflation or deflation? Why? 11. How is monetary policy used during a recession? During a boom?

12. How is fiscal policy used during a recession? During a boom?

CHAPTER 12.

1. Define and explain, “market structure.”

2. Explain the impact of the number of firms in an industry on market outcomes and performance.

3. Define, “Perfect Competition.” List and explain the four characteristics of perfect competition.

4. Give an example of a perfectly competitive firm, and explain why it meets the definition of perfect competition.

5. Define and explain the terms, “price maker” and “price taker.” Give an example of each type of firm.

6. Are there any monopolies in the real world? Give an example and explain why or why not.

7. What is an oligopoly? What the characteristics of oligopoly, and provide an example.

8. What is “freedom to enter and exit” an industry? Which firms have this ability, and which firms do not?

9. Why are competitive industries considered, “efficient?”

10. Describe a good business strategy for a competitive firm.

11. Who are the major beneficiaries of technological change?

CHAPTER 13.

1. Is market power a good thing or a bad thing? Explain.

2. What types of firms have market power? Do they use this power? Is it legal? Should it be legal? Explain.

3. Does a monopolist have complete price setting ability? Explain why or why not.

4. Will a monopolist maximize total revenues or profits? Accounting profits or economic profits?

5. Draw the profit-maximizing solution for a monopolist. What are the profitmaximizing conditions for the monopolist? How do they differ from a perfectly competitive firm?

6. Define and explain a natural monopoly. Give an example, and explain how these firms come into existence.

7. Which is a better market structure to be in: monopoly or natural monopoly? Why? 8. What are the defining characteristics of monopolistic competition? Graph a monopolistically competitive firm in the short run and the long run.

9. Define and explain, “nonprice competition” and provide an example.

10. Explain collusion. Is it legal or illegal? Can real-world firms collude? Do they?

11. Use a graph to demonstrate and explain a cartel.

12. Are large firms such as Walmart and Microsoft good or bad for the economy?

Explain. Should these huge firms be allowed to exist? Why or why not?

13. Define the terms, “Equilibrium in Dominant Strategy” and “Nash Equilibrium.”

14. Explain the difference between “Equilibrium in Dominant Strategy” and “Nash Equilibrium.”

CHAPTER 14.

1. Is international trade positive issue for an agricultural firm? Under what conditions?

When is international trade a negative issue?

2. Use graphical analysis to show how trade between two individuals (regions, nations) can increase the welfare of both parties.

3. Use Adam Smith’s concept of absolute advantage to explain why trade occurs between nations. What are the strengths and weaknesses of this theory? Is international trade in today’s world based on absolute advantage?

4. Explain opportunity cost.

5. Use David Ricardo’s concept of comparative advantage to explain why trade occurs between nations. What are the strengths and weaknesses of this theory? Is international trade in today’s world based on comparative advantage?

6. Currently, the US is a major exporter of agricultural products such as wheat and beef.

Simultaneously, the US imports approximately one half of the food consumed in the nation, based on value. Explain the economic meaning of this.

7. What is the purpose of free trade agreements such as NAFTA and GATT? Are these agreements effective? Explain why or why not.

8. If economists are strong proponents of free trade, why are there so many trade barriers?

9. The US has import quotas for sugar. Explain why. Explain the economic consequences of this policy on sugar producers and consumers in the US and the rest of the world.

10. Is globalization a good thing or a bad thing? Who benefits and who is hurt by trade?

11. A large amount of consumer goods purchased in the US are produced in other nations. If this trend continues, there will be no jobs and no economy left in the US. Comment.

12. Use a three-panel diagram to show who benefits and who loses from globalization and trade.

13. Use a three-panel diagram to show who benefits and who loses from immigration.

CHAPTER 15.

1. Define and explain, “market failure.” Identify four situations where market failure occurs.

2. Suppose that agricultural chemicals are being used near a suburb, and the “drift” of the chemicals is affecting the gardens and trees of the suburb. Explain how Coasian bargaining could be used to solve this issue.

3. Define and explain, “tragedy of the commons.” Explain how cattle grazing on public land could result in a tragedy of the commons.

4. Provide a solution to the tragedy of the commons.

5. Define and explain a Pigouvian tax. What are the strengths and weaknesses of using a Pigouvian tax to solve a resource issue in agriculture?

6. What is an “externality?” How is it related to agricultural production?

7. Analyze the statement, “The optimal level of water pollution is zero.” This statement is often made by environmentalists. Are they correct?

8. How will an externality affect the profit maximization decision? Will a firm change production levels when an externality exists? Why or why not?

9. Provide an example of an externality issue in your region. What solutions are available for this externality?

10. Why are environmental issues of special significance for agricultural producers?

What policies should be implemented for these issues?

CHAPTER 16.

1. List and explain the four major sectors of the food supply chain.

2. Explain why the farm value of one dollar spent on food is equal to 15 cents.

3. List and explain the four major functions of management.

4. Describe how an agribusiness firm would conduct strategic planning and management.

5. Carefully define and explain the two terms, “risk” and “uncertainty.”

6. Explain how a corn farmer in Iowa could use futures markets to mitigate price risk.

7. Explain how contract farming works.

8. Define and explain the difference between a speculator and a hedger.

9. What is “basis risk,” and why is it important?

10. Explain why one dollar today is worth more than one dollar tomorrow.

11. Show your employer how you would discount future revenues to make them comparable to today’s dollars.

12. Show your employer how you would compound revenues from previous years to make them comparable to today’s dollars.

13. What is the PV of USD 1000 earned over the next five years?

14. Calculate the NPV of a project that costs USD 20,000 today and returns USD 8,000 for the following six years.