Agriculture economics

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Suggested Readings 45 REVIEW QUESTIONS 1. What is a farm? Why has the definition of a farm been changed in recent years? 2. The number of American farms has been declining. What are some factors influencing this trend? 3. How does a cooperative differ from a “for profit” corporation? 4. Corporate farms have been increasing in number. What impact could this development have on family farms? 5. Agricultural producers are responsible for producing the final product that the consumer purchases. Thus, the agricultural marketing system is unproductive. Discuss. 6. Farmers and ranchers should adjust their production to the food and fiber needs of consumers. Discuss. 7. "The U.S. government should restrict imports of agricultural commodi- ties, since we can produce all commodities more efficiently than any other country.” Discuss. 8. What is gross domestic product (GDP)? What does it measure? 9. How do the government's regulatory powers, monetary policy, and fiscal policy influence economic activity in the system? SUGGESTED READINGS Abrahamsen, Martin A. Cooperative Business Enterprise, New York: McGraw-Hill, 1976, Chapters 1-3. Agricultural Outlook, a monthly magazine. Washington, D.C.: Economic Research Service, U.S. Department of Agriculture. Handbook of Agricultural Charts, Washington, D.C.: Economic Research Service, U.S. Department of Agriculture. Agribusiness Coordination, Boston, Mass.: Division of Research, Goldherr R RaTrA Change in quantity demanded Complements Cross price elasticity Demand curve Diminishing marginal rate of substitution Engel curve Equilibrium Indifference curve Indifference map Law of diminishing marginal utility Market demand curve Price elasticity of demand Substitutes Substitution effect REVIEW QUESTIONS 1. Define utility. Is temperature measurable? Is utility measurable? 2. Indifference curves represent the tastes and preferences of a consumer. add up indifference curves to show the tastes and preferences of a nation? Why, or why not? Can you V Consumer Behavior and Demand Chapter 3 74 3. Demand curves normally slope downward and to the right. Can you think of abnormal demand curves that have different slopes? 4. Given your knowledge of elasticity, why would legislators continue to raise the tax on products such as cigarettes and beer? 5. What is the difference between a change in demand and a change in quantity demanded? 6. Explain the factors that would shift a given demand curve. 7. Explain the meaning of a cross elasticity coefficient between bread and butter of -1.8. SUGGESTED READINGS Awh, Robert Y. Microeconomics: Theory and Applications, Santa Barbara, Calif.: John Wiley & Sons, 1976, Chapter 6. Goodwin, John W. Agricultural Economics, 2nd ed. Reston, Va.: Reston, 1982, Chapter 12 Heyne, Paul T. The Economic Way of Thinking, 7th ed. New York: Macmillan, 1993, Chapter 2 Leftwich, Richard H., and Ross D. Eckert. The Price System and Resource Allocation, 10th ed. Hinsdale, III.: The Dryden Press, 1987, Chapters 5 and 6. Samuelson, Paul A., William D. Nordhaus and Michael J. Mandel. Economics, 15th ed. New York: McGraw-Hill, 1995, Chapter 22. AN OUTSTANDING CONTRIBUTOR Jean Kinsey Jean Kinsey is currently professor in the Department of Agricultural and Applied Eco- nomics and Director of the Food Retail Industry Center at the University of Minnesota. Lan's back the use of that resource. Profit is greater (or losses less) when that marginal unit is not used because costs are reduced more than is revenue by that reduction in resource use. As we relate the quantities of a variable resource to different prices for that resource, we can note the special conditions in the demand for any good or resource. The higher its price, the less of any good or resource that will be used, and conversely. Plotting the pairs of price-quantity observations identifies the firm's demand for a variable resource. The Stage II portion (only) of the MVP curve of any variable resource is the firm's demand curve for that resource. CHAPTER HIGHLIGHTS 1. Resources, production, and goods and services are words or terms with economic meaning. In the process of using resources to produce goods and services, utility is created because human wants can be satisfied with them. 2. The universe of things and their relations to one another are far too complex for the human mind to grasp without a systematic abstraction and classification. 3. The relationship between resources and their product is called a production function. sud 96 - Chapter 4 Producer Decision Making: Input Functions 4. A constant input-output relationship results when we do not change land, labor, capital, and management. This relationship may be the makeup of the input unit formed from the four basic resources, summarized with the general function Y=f(X1 ... Xn), t K R or simply Y =f(x). described by the general function Y =f(X1/X2, X3, X4). the inputs used to produce something, a relationship 5. Diminishing returns are the inevitable consequence of changing pro- 6. The law of diminishing returns states that “as successive amounts of a variable input are combined with a fixed input, the total product will increase, reach a maximum, and eventually decline. 7. Marginal physical product is the amount that is added to total product when another unit of the variable input is used. MPP measures the rate of change in the input-output relationship and is obtained by dividing the change in total physical product (TPP) by the causal change in the variable input. 8. Average physical product is a measure of the average productivity of the variable input. APP is obtained by simply dividing total output by the number of units of the variable that produced the product. 9. Taken together, MPP and APP define three stages of production in only one of which (Stage II) will an economic optimum be found. 10. When output is multiplied by the price of the product we have total value product — TPP Py = TVP. We then derive MVP and AVP in the same way as their physical counterparts were derived: ATVP MVP = AX1 X TVP and AVP = X1 11. The amount that is added to total cost, when another unit of the variable input is used, is called marginal factor cost — MFC — which is the market price of that resource, so MFC = Px1. 12. Knowing both returns and costs at the margin permits us to determine the optimal rate at which to use the variable input. The optimum is determined by equating MVP and MFC. Too little of the resource is being used if MVP is greater than MFC; the opportunity to capture that excess of value over costs is needlessly forfeited. If MVP is less than MFC, the last unit of output costs more to produce than it is worth, and too much of the variable input is being used. 13. The MVP curve within Stage II is the firm's demand curve for the variable input, observed by noting the optimal quantity of the input used at each different price for that resource.
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AGRICULTURE ECONOMICS QUESTIONS Name Institution Agriculture economics questions Review questions1. What is a farm? Why has the definition of a farm been changed in recent years? USDA terms a farm as any portion that is capable of producing and selling agricultural products that are at least worth $1000 per annum (Martin, 2011). Farm’s definition has been changed in recent years because as time passes by farms have been declining thus unable to meet the termed worth per annum. 2.The number of American farms has been declining. What are some factors influencing this trend? One of the factors influencing this trend is the regard of urbanization and related urban pressures where several farms have been used to set up industries and other urban centers. Second, has been the issue of comparative disadvantage in a broad range of crops. Third, the increased population has always dictated the need for using more farms to set up people’s settlements. 3. How does cooperative differ from a “for profit” corporation? A cooperative is a group of members aiming at attaining aspirations and common needs through democratic decision making and sharing ownership. Cooperative is owned by group members and does not aim at making profits rather it aims at attaining economic, mutual, social and cultural benefits. On the other hand, “for profit” corporation denotes a legal entity owned by shareholders and whose main aim is to make profit...


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