Introduction to Agricultural Economics Agricultural Economics 105 Fall 2017 First Hour Exam Version 1

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1 1 Name Introduction to Agricultural Economics Agricultural Economics 105 Fall 2017 First Hour Exam Version 1 There is only ONE best, correct answer per question. Place your answer on the attached sheet. DO NOT RIP THE ANSWER SHEET FROM THE TEST. HAND IN BOTH THE TEST AND ANSWER SHEET. Each question is worth 2 1/2. 1. The opportunity cost of going on a date this Friday night is a. missing the opportunity of going to the movies with your friends. b. the monetary cost of the date. c. the sum of all the other opportunities you have for this Friday night as all choices are important. d. the next best opportunity you have. e. a and b. 2. A firm s supply curve is a. the MC curve above the breakeven price. b. the AVC curve above the shutdown price. c. the part of the MC curve that is upward sloping. d. the MC curve above the shutdown price. e. the AVC curve above the MC curve. 3. Texas A&M soccer program increases the price of tickets to their home games, the most likely result is a. a decrease in the quantity demanded for game tickets. b. an increase in the quantity demanded for game tickets. c. a decrease in the demand for game tickets. d. an increase in the demand for game tickets. e. no change in demand or quantity demanded. 4. If Good B is a complement of Good A and the price of Good B increases, all else constant the a. quantity demanded of good A will increase. b. quantity supplied of Good A will increase. c. demand of good A will increase. d. demand of good A will decrease. e. supply of good A will decrease.

2 2 5. The number of cars passing through the intersection of Holleman Drive and FM 2818 has increased exponentially since the opening of new apartments on the southwest side of This is an example of a. an rightward shift in the demand curve for driving through the intersection. b. an leftward shift in the demand curve for driving through the intersection. c. an decrease in the price of driving through the intersection as the apartments are close to campus change in quantity demanded. d. an increase in the price of driving through the intersection as the apartments are close to campus change in quantity demanded. e. no change to the demand curve, students before and after the opening of the apartments have to drive to campus to attend class. 6. An indifference curve is downward sloping because if quantity consumed of Good A is the quantity consumed of Good B must be to maintain the same utility. a. decreased, decreased. b. increased, increased. c. decreased, increased. d. increased, decreased. e. c and d. 7. The property of indifference curves that allows one to draw the curve anywhere in the right hand quadrant is a. negatively sloped. b. non-intersecting. c. convex to the origin. d. increasing utility as one moves upward and to the right. e. everywhere dense. 8. You are enjoying pizza watching the Aggie game. As you eat more pizza during the game your satisfaction level per piece of pizza decreases. This reflects a. the law of marginal returns. b. the law of diminishing marginal utility. c. the law of demand. d. consumer equilibrium. e. opportunity costs.

3 3 For questions 9-11 use the following graph. Given his limited funds of $50 for food, Tommy Joe has decided to live on tomato soup and saltine crackers this semester. Tommy Joe is shopping at Sam s Club where the price of saltine crackers is $10 and the price of a pack of soup is $5. Each question is independent of the other questions. 9. Which line represents Tommy Joe s budget constraint? a. A. b. B. c. C. d. D. e. E. 10. Which lines represent changes in Tommy Joe s budget constraint? a. A, B, and E. b. A, B. and D. c. B, C, and D. d. A and E. e. C and D. 11. Let Tommy Joe s budget constraint be line C, which line represents a change in the price of crackers? a. A. b. B. c. B and D. d. D. e. E.

4 4 For questions use the following graph of Tommy Joe s indifference curves. 12. Which point represents Tommy Joe s largest utility? a. A. b. B. c. C. d. D. e. E. 13. In which points is Tommy Joe's utility the same? a. A and B. b. B and C. c. C and D. d. A and D. e. A, B, C, D and E. 14. According to economic theory, Tommy Joe s consumer equilibrium is at a point where his budget line indifference curve. a. is a straight line parallel to the b. intersects from below the c. shows diminishing marginal utility relative to the d. is at is maximum relative to the e. is tangent to the

5 5 15. To be part of aggregate demand a consumer must have both willingness and ability to pay. Willingness is shown by and ability to pay is given by. a. utility, marginal utility b. budget constraint, indifference curves c. individual demand, supply d. indifference curves, budget constraint e. marginal rate of substitution, diminishing marginal utility For questions consider the following company scenario. Duluth Trading cuts their price on Fire Hose work pants from $50 to $30 and sales increased from 90 pairs to 110 pairs per day. The only other type of work pants are made by Carhatt. 16. Duluth Trading own-price elasticity of demand is a b c d e A negative own-price elasticity of demand reflects a. increasing marginal utility. b. the law of demand. c. The law of supply. d. decreasing marginal utility. e. marginal rate of substitution. 18. The change in pairs sold is partially because of a substitution effect which is reflected in the a. ratio of the amount of Duluth pants to Carhatt pants sold. b. increase in the consumer s opportunity set. c. ratio of income to price of Duluth pants (divide income by price). d. change in price ratios. e. marginal rate of income substitution. 19. The change in pairs sold is partially because of an income effect which is reflected in the a. ratio of the amount of Duluth pants to Carhatt pants sold. b. increase in the consumer s opportunity set. c. ratio of income to price of Duluth pants (divide income by price). d. change in price ratios. e. marginal rate of income substitution.

6 6 20. Carhatt s sales of work pants goes from 120 pairs to 100 pairs per week because of the above price change by Duluth. What is Carhatt s cross-price elasticity? a. Positive. b. Negative. c. One. d. Zero. e. Need to know the price of Carhatt s work pants. 21. Following Hurricane Harvey several oil refineries shut down. Theses refineries will be back operating in October. The act of refineries starting to operate in October should a. shift the supply curve of gasoline upward, decrease supply of gasoline. b. shift the supply curve of gasoline downward, increase supply of gasoline. c. shift the demand curve for gasoline to the right. d. shift the demand curve for gasoline to the left. e. have no effect of the market equilibrium point as both demand and supply will shift. 22. Are seats during the TAMU Alabama football game played in 100,000 seat Kyle Field Stadium scarce? a. Yes, seats are physically scarce. b. No, seats are not economically scarce. c. No, seats are not physically scarce. d. No, seats are not both physically and economically scarce. e. Yes, seats are economically scarce but not physically scarce. Refer to the following table for questions Angelia uses flour cups to create tortillas in her bakery. Cups of Flour TPP tortillas MPP APP TC MC What is the MPP for 17 cups of flour? a. 2.5 b. 2.4 c. 2.3 d. 2.0 e. 3.0

7 7 24. What is the APP for 21 cups of flour? a. 3.1 b. 3.0 c. 2.9 d. 2.5 e As shown MPP is decreasing along with APP. MPP will become negative a. in Stage I. b. in Stage II. c. when we reach production maximization. d. never, MPP is always positive. e. when MPP = APP. 26. What is the MC for 21 cups of flour? a. 1.8 b. 1.9 c. 2.5 d Amazon recently purchased Whole Foods, which sells organic grown food. Amazon reduced prices by about 40% and sales increased by 25%. Total revenue associated with Whole Foods a. increased as the own-price elasticity is inelastic. b. increased as the own-price elasticity is elastic. c. decreased as own-price elasticity is inelastic. d. decreased as own-price elasticity is elastic. e. did not change as own-price elasticity is unitary. 28. Mr. Gendel sells bread. He operates in perfect competition and each tray of bread sells for $50. The marginal costs of producing one tray is $45, producing two trays is $55, and producing three trays is $60. Mr. Gendel should sell a. one tray per day. b. two trays per day. c. three trays per day. d. between one and two trays per day. e. between two and three trays per day.

8 8 29. Long run is best characterized by a. more than five years as discussed in the class notes. b. a year, as that is the period for filing taxes. c. the slopes of the MPP and APP curves. d. having at least one input fixed. e. all inputs are variable. 30. Perfect competition applies when four of the following conditions are met. Which condition is not required? a. There must be many sellers. b. The buyers and sellers must trade an identical (homogenous) item. c. Buyers and sellers have perfect knowledge. d. There must many buyers. e. The product must sell at a single price. 31. The reason supply curves slope upward is a. the law of supply. b. increasing marginal costs. c. diminishing marginal utility. d. the law of demand. e. Decreasing TPP. 32. Income elasticity of demand for Fresh Black Winter Perigord Truffles (fruiting body of a subterranean fungus) from France has been estimated to 5.2. These Truffles are a. a normal good. b. a necessity good. c. an inferior good. d. a luxury good. e. a and b. f. a and d. g. a and c. 33. The is the portion of the food expenditures associated with activities beyond the farm gate. a. Farm Value. b. Food Bill. c. Farm Programs. d. Value added component associated with processing food. e. Marketing Bill.

9 For questions 34 36 refer to the following figure. The market price for the output is $20 / unit and input price is $4. 34. Total revenue at the profit maximizing level of output is a.

area 20, E, I, 10 c. area 4, K, 300, 0 d. area 20, E, G, 5 e. area 20, E, K, 4 36. Profits at the profit maximizing level of output are a. positive b. negative c. area 20, E, I, 10 d.

9 9 For questions refer to the following figure. The market price for the output is $20 / unit and input price is $ Total revenue at the profit maximizing level of output is a. area 20, D, 220, 0 b. area 20, E, I, 10 c. area 10, D, 220, 0 d. area 4, F, 85, 0 e. area 20, E, 300, Total costs at the profit maximizing level of output is a. area 5, G, 300, 0 b. area 20, E, I, 10 c. area 4, K, 300, 0 d. area 20, E, G, 5 e. area 20, E, K, Profits at the profit maximizing level of output are a. positive b. negative c. area 20, E, I, 10 d. area 20, E, G, 5 e. b and d f. a and d g. c and d 37. What are fixed costs for the firm depicted in the following graph? a. Need to know the profit maximizing level of output as given by price. b. $25 c. $45 d. $70 e. There are no fixed costs as AFC is not depicted in the graph.

10 Kroger increases the price of pork tenderloins. As a result, you buy more potatoes. Assuming that pork and potatoes are normal goods, which of the following best describes the situation? a. For the consumption of pork, the substitution effect is positive and the income effect is negative. b. For the consumption of pork, the substitution effect is negative and the income effect is positive. c. For the consumption of potatoes, the substitution effect is positive and the income effect is negative. d. For the consumption of potatoes, the substitution effect is negative and the income effect is positive. e. The effects are indeterminate. 39. Under the Federal Family and Medical Leave Act, businesses are required to provide 12 workweeks of leave in a 12-month period for the birth of a child. This requirement results in an increase the cost of inputs (employees). Assuming labor is a variable input, which of the following is true? a. The firm s average fixed costs increase. b. The firm s average total costs increase. c. The firm s average variable costs increase. d. a, b, and c. e. b and c. You have estimated the following elasticities associated gasoline purchases. own- price elasticity of demand for gasoline = -0.9 income elasticity of demand for gasoline = 0.5 own- price elasticity of demand for bus rides = Your boss rewards you with a 10% raise, how does this influence your gasoline purchases? a. decreases by 9% b. increases by 9% c. decrease by 5% d. increases by 5% e. increase by 0.2% 41. The City of Houston (where you work) decreases the price of a bus ticket by 5%, how does this influence your number of bus rides? a. decreases by 4.5% b. increases by 4.5% c. increases by 2.5% d. increase by 0.10% e. decrease by 0.10%

11 11 There are 41 questions, only 40 will be graded. Please pick the one question you do not want graded by placing XXX in the answer line. If you do not pick a question to not be graded, question 41 will not be graded. Test Version 1 Name Question Answer Question Answer Grade

Introduction to Agricultural Economics Agricultural Economics 105 Spring 2018 First Hour Exam Version 1

1 Name Introduction to Agricultural Economics Agricultural Economics 105 Spring 2018 First Hour Exam Version 1 There is only ONE best, correct answer per question. Place your answer on the attached sheet.