Deck 3: A Policy Analysis Toolbox: Methods to Investigate Agricultural and Food Market Scenarios

Question 1

Economists assume that rationality is a typical or normal human behavior in decision making. To achieve an optimal result, the rational decision maker is predicted to choose additional units of a scarce item until:

A) marginal benefits are greater than marginal costs
B) marginal benefits are less than marginal costs
C) marginal benefits equal marginal costs.
D) marginal benefits are maximized.
E) marginal costs are maximized.

Answer 1

C
Explanation:Maximization of the total net value from hiring scarce resources within a limited budget requires additional output use until marginal cost = marginal benefit.

Question 2

When a market or a policy achieves a ""Pareto-Optimum"", then

A) it is still possible to make one additional person better off, without making others worse-off.
B) the economy's Real GDP is equally divided among all decision-makers.
C) it is no longer possible to make one additional person better-off without making another person worse-off.
D) it is possible to make all decision makers in the economy better-off with a new policy choice.
E) none of theabove.

Answer 2

C
Explanation:When the economy achieves a Pareto Optimum, then all mutually beneficial trades have been exhausted, and no additional activity can make anyone better off without making others worse-off.

Question 3

Assume that suppliers of soybeans experience a change in natural production conditions. The natural growing conditions change from "normal" to "below normal". Which of the following is the best prediction of the impact of this change in production conditions in the soybean market?

A) a decrease in demand for soybeans (demand shifts to the left)
B) no change in either the supply or the demand for soybeans (neither function shifts)
C) an increase in supply of soybeans (supply shifts to the right)
D) a decrease in supply of soybeans (supply shifts to the left)
E) an increase in demand for the product. (demand shifts to the right)

Answer 3

D
Explanation:A change in production conditions is a supply-side movement in the market. When production conditions deteriorate, then we predict a ""decrease in supply"" as the result.

Question 4

The claim that human beings are constantly faced with the necessity to "make choices," and the idea that every choice is accompanied by an opportunity cost, are emphasized in economics because

A) resource scarcity is not a problem for most people.
B) resources are assumed to be relatively scarce.
C) final goods and services are not relatively scarce.
D) human beings, on the average, are assumed to be irrational decision makers.
E) resource prices typically are generally very poor good indicators of relative scarcity.

Question 5

Suppose the Czech Republic and Slovakia can produce either wheat or cotton on an acre of land. If the Czech Republic (CR) produces 1.0 bale of cotton, the CR gives-up 1.33 bushels of wheat. If Slovakia (SK) produces 1.0 bale of cotton, SK gives-up 2.00 bushels of wheat. Which nation has a comparative advantage in cotton output, and which nation has comparative in wheat output?

A) CR has a comparative advantage in cotton output, and SK has a comparative advantage in wheat output.
B) SK has a comparative advantage in cotton output, and CR has a comparative advantage in wheat output.
C) Neither SK nor CR have a comparative advantage in the output or either crop.
D) SK has a comparative advantage in both cotton and wheat output.
E) CR has a comparative advantage in both cotton and wheat

Question 6

Idenrtify the key measurement in economics that is most closely associated with this managerial question? "What is the extra $cost of producing one more unit of output?

A) Average Total Cost
B) Total Variable Cost
C) Marginal Cost
D) Average Variable Cost
E) Average Fixed Cost

Question 7

Consider electricity and natural gas as alternative and substitute energy sources. In this scenario, we predict the cross-price elasticity of demand coefficieint for these two power sources to be negative (Ex<0)

Question 8

The reaction to a price change along a product's demand curve is known to be elastic (Ep > 1) , Assume that that the $price increases for this product with an elastic demand. Under these conditions, total revenues ($P x Qd) received by a firm will decrease.

Question 9

Suppose a market experiences an "Increase in Supply", while the Demand Curve remains constant. Predict the correct changes in the equilibrium price and equilibrium quantity that are produced by the "increase in supply":

A) The Equilibrium Price remains constant, and the Equilibrium Quantity Increases.
B) The Equilibrium Price increases, and the Equilibrium Quantity Increases.
C) The Equilibrium Quantity remains constant, and the Equilibrium Price increases.
D) The Equilibrium Quantity increases, and the Equilibrium Price decreases.
E) The Equilibrium Quantity decreases, and the Equilibrium Price increases.

Question 10

As defined in the model of supply and demand, the corn market temporarily experiences a shortage. Then the market begins adjusting itself, and moves towards the equilibrium price for corn. As the corn price increases, we predict that:

A) an increase in the quantity supplied of corn occurs as the market adjusts to its equilibrium price.
B) a decrease in the quantity demanded of corn occurs as the market adjusts to its equilibrium price.
C) a shift to the left of the demand for corn is necessary, if the market is to recover from the shortage and restore its equilibrium price.
D) a shift to the right of the supply of corn is necessary, if the market is to recover from the shortage and restore its equilibrium price.
E) both answers ""a"" and ""b"".

Question 11

Which of the following is the best and most accurate definition of the Law of Demand?

A) As businesses increase the price and quality of a product, consumer demand for the higher quality product increases, ceteris paribus.
B) In response to an increase in household income, consumers increase their demand for inferior goods, ceteris paribus
C) After households increase the quantity demanded for a product, the product price increases, ceteris paribus.
D) As the price of a product decreases, the consumers imake no change in the quantity demanded for that product, ceteris paribus.
E) As the price of a product decreases, the consumers increase their quantity demanded for that product, ceteris paribus.

Question 12

A market is analyzed in economics as a situation where

A) both buyers and sellers benefit by making voluntary exchanges.
B) sellers benefit but buyers do not.
C) government determines the product prices that sellers charge and buyers pay.
D) buyers benefit but sellers do not.
E) neither buyers nor sellers benefit by making voluntary exchanges.

Question 13

Which of the following statements best describe what the law of increasing opportunity costs means?

A) The marginal cost of producing additional units of the same product eventually decreases as the resources needed to create the final output become less and less scarce.
B) The marginal cost of producing additional units of the same product remains constant as the resources needed to create the final output achieve a balanced level of scarcity.
C) The marginal cost of producing additional units of the same product eventually decreases at a decreasing rate as the resources needed to create the final output become decreasingly less scarce.
D) Because not all resources are equally adapted to alternative uses, the marginal cost of producing additional units of the same product increases; so, as consecutive units of the same item are produced, the extra cost of each additional unit increases.
E) Either answer "a" or "c" is correct.

Question 14

In economics, a resource is identified as a scarce resource, if the supply of the resource is unlimited in comparison to the relatively limited human demands for that resource.

Question 15

A Pareto-Better choice occurs when at least one person is made better-off, without making others worse-off.