Final Exam Study Guide ABM 100

True

A current trend is for large food retailers to serve as their own wholesalers.

Additional form value in order to extend the shelf-life of the food product

A unique feature of the agri-food system is seasonal production and consumption. One of the likely impacts of this seasonality is: a. Decreased storage costs for commodities and food products. b. Stable commodity prices throughout the year c. Additional form value in order to extend the shelf-life of the food product d. Food manufacturers locating in close proximity to food retailers.

Sell a July contract today

A wheat farmer who wants to hedge the crop he plans to harvest next July should do what? a. Buy a July contract today b. Sell a May contract in July c. Sell a July contract today d. Buy a May contract in July

The farm share of the food dollar

All of the following measures have been experiencing an increased trend over the last forty years, except one. Which of the following has been experiencing a downward trend? a. The farm share of the food dollar b. Share of total expenditures for food consumed away-from home c. Real (inflation adjusted) retail food prices. d. Total expenditures on food and alcohol.

-22.0%

As the manager of Chipotle, you want to increase the number of burritos sold by 11%. Market research shows that the elasticity of demand for your area is -0.50. To increase your sales by 11%, you should change the price of your products by: a. 4.5% b. -22.0% c. 22.0% d. -4.5%

Shift the supply curve, increasing the price and decreasing the quantity traded in the market

Assume that an early frost destroys much of the fresh orange crop in CA. This event will most likely affect the market for fresh oranges in the following way: a. Shift the supply curve, decreasing the price and increasing the quantity traded in the market. b. Shift the supply curve, increasing the price and decreasing the quantity traded in the market. c. Shift the demand curve, increasing the price and decreasing the quantity traded in the market d. Shift the demand curve, decreasing both the price and quantity traded in the market.

An increase in total revenue for mango producers

Assume that the elasticity of demand for mangoes is -0.65. Therefore, a decrease in the supply of mangoes would result in: a. A decrease in the demand for mangoes b. An increase in the total revenue for mango producers c. Lower prices for mangoes d.None of the above

The total revenue of almond producers will increase when the supply of almonds increases

Assume that the quantity demanded of almonds increases by 15 percent when the price of almonds decreases by 10%. Which of the following would be true? a. The price elasticity of demand for almonds is -0.666 b. The price elasticity of demand for almonds is inelastic c. The total revenue of almond producers will increase when the supply of almonds increases d. The total revenue of almond producers will decrease when the supply of almonds increases

+0.85

Assume that the short-run elasticity for the supply of coffee is +0.25. In the long-run, what do you think would be the most reasonable number for the long-run supply elasticity of coffee? a. -0.85 b. +0.85 c. -0.15 d. +0.10

A 1.5% decrease in quantity

Assume the elasticity of supply for pizza is +0.50 and the elasticity of demand for pizza is -0.15. If a frost ruins the tomato crop and causes pizza restaurants to increase their prices by 10%, what will the percentage change in the quantity of pizzas traded in the market? a. A 5% decrease in quantity b. A 1.5% decrease in quantity c. A 15% decrease in quantity d. A 7.5% decrease in quantity

Quantity demanded will decrease by 4%, but total revenue will increase

Baskin-Robbins estimates that the elasticity of demand for its ice cream is -0.80. If BR raises the price of its ice cream by 5%: a. Quantity demanded will decrease by 4%, but total revenue will increase b. Quantity demand will decrease by 6.25% and total revenue will decrease c. Quantity demanded will decrease by 4% and total revenue will decrease d. Quantity demanded will decrease by 6.25% but total revenue will increase

Can be used by farmers to reduce price risk

Futures market: a. Allow farmers to receive the highest price possible for their crops b. Should only be used by hedgers willing to take large amounts of risk c. Determine what the price of a commodity will be in the future. d. Can be used by farmers to reduce price risk

A $0.175/bu. increase

Given that the units on a corn contract are cents and quarter-cents/bu, if the July corn contract opens at 324'2 and closes at 306'6 on a given day, what was the change in value that day?

The price of Red Bull will increase

If Monster Energy and Red Bull are substitutes and the price of Monster Energy increases, then the likely impact on the Red Bull market will be that: a. The price of Red Bull will increase b. The quantity traded in the market will decrease c. The supply of Red Bull will increase d. The demand for Red Bull will decrease

The supply curve for hogs would shift, increasing the price and decreasing the quantity traded in the market

If soybean meal is an input into hog production, then how would an increase in the price of soybean meal impact the hog market? a. The supply curve for hogs would shift, decreasing the price and increasing the quantity traded in the market. b. The demand curve for hogs would shift, decreasing both the price and the quantity traded in the market. c. The supply curve for hogs would shift, increasing the price and decreasing the quantity traded in the market. d. The demand curve for hogs would shift, increasing both the price and quantity traded in the market.

Both the cash price and the futures contract price will increase

If the USDA announces a larger than expected demand for U.S. soybean exports, then it is likely that the soybean market: a. Both the cash price and the futures contract price will decrease b. Both the cash price and the futures contract price will increase. c. The cash price will increase but the futures contract price will remain unchanged d. The cash price will increase, but the futures contract price will decrease

$6-$8

In $100 of retail food, the value added by farmers is approximately: a. $6-$8 b. $18-$20 c. $25 d. $80

Exercise market power

In 2018, the German company Bayer acquired the U.S. company Monstanto, at the time they were two of the largest input suppliers in the farm supply and seed sector. The proposed deal was heavily scrutinized by the European and U.S. governments for a number of reasons, including the fact that if the acquisition occured, the new bigger Bayer company would control upwards of 90% of the soybean and cotton traits in the seed market. Why would soybean and cotton farmers have been concerned about the deal taking place? a. Increased market competition b. Exercise market power c. Decrease its per unit costs of storage and distribution d. Decrease its per unit costs of production and processing

$10.5675 per bushel

In November, a farmer in Illinois sells an AUG18 soybean futures contract for $10.5700 per bushel. In August when he sells his crop, he offsets his futures hedge for $10.8025 per bushel. At the same time, he sells his soybean crop in the cash market for $10.8000 per bushel. Assuming no broker fees and accounting for profit/loss in the futures market, what is the NET price per bushel he receives for his soybeans? a. $10.5675 per bushel b. $10.5700 per bushel c. $10.8000 per bushel d. $11.0325 per bushel

A decline in the number of farms

In the 20th century, substantial increases in agricultural productivity occurred, primarily due to technological advances. These increases in productivity have led to: a. Decreased dependence on global markets for our exports b. Increased diversification at the farm level c. A decline in the number of farms d. Higher retail food prices

Irrigation equipment for growing tomatoes

In the tomato market channel for Hunt's ketchup, an agricultural input supplier would most likely sell: a. tomatoes for ketchup b. irrigation equipment for growing tomatoes c. sugar and other ingredients to make ketchup d. conveyor belts used in moving bottles of Hunt's ketchup

Posession

Red Bull's sponsorship of golfer Lexi Thompson is an example of adding what type of value in the Red Bull market channel?

False

T/F: A CR4 above 40 proves that firms in the industry are exercising market power

False

T/F: A change in the consumers' income would most likely cause a movement along the demand curve for potato chips

False

T/F: A change in the price of hay used to feed dairy cows would cause a change in the demand for milk.

False

T/F: A larger income elasticity implies a smaller shift in the demand curve given a change in income (all else equal)

False

T/F: A salesperson who visits with farmers, takes them to lunch, and shares information regarding the product the salesperson has to sell is providing time value.

True

T/F: A speculator in the futures market neither owns nor intends to own the commodity in the futures contract.

False

T/F: A speculator in the futures market would sell a futures contract because he/she expects the futures contract price to rise

True

T/F: A tax on one good will impact the demand for that good's substitues

False

T/F: Advertising that creates brand loyalty and increases product differentiation will likely increase the elasticity of demand.

False

T/F: An increased preference for imported food products has led to an increase in the Food Marketing Bill

True

T/F: Approximately 50% of total food expenditures is for food purchased away from home.

False

T/F: Approximately one-half (50%) of all meals are consumed away-from-home

False

T/F: Assume that in February, Russia lifted a ban on all chicken meat (broiler market) imports from the U.S. To estimate the impact on the chicken market due to the opening of Russia as a buyer of U.S. chicken meat, one would need to use the elasticity of demand for chicken meat.

False

T/F: Based on food industry CR4 calculations, the brewery sector is one of the least concentrated sectors

False

T/F: Both China and Japan are in the top three export destinations and import sources for U.S. agricultural food exports.

False

T/F: Both food retailers and food service retailers will likely add form value to a food product.

False

T/F: Due to its northern climate, Michigan is relatively limited as to how many different types of commodities it can grow and is not very agriculturally diverse.

True

T/F: Due to the unique features of agriculture, farmers must make decisions based upon expected prices and expected yields instead of on known prices and yields.

True

T/F: Farmers account for approximately 2% or less of the U.S. poopulation

False

T/F: Futures contracts for sugar would most likely be traded on the New York Stock Exchange

True

T/F: Hedgers use the futures market to manage price variability and risk

True

T/F: If a surplus exists in the market, then there is a downward pressure on price

False

T/F: If the government imposes a new per unit tax, the tax revenues collected by the government will be more if demand is elastic than if it is inelastic.

True

T/F: If two goods are substitutes, then their cross-price elasticity is positive.

False

T/F: In the U.S., there is very little difference in consumer tastes and preferences for food between various demographic groups (for example, baby boomers and millennials).

True

T/F: In the movie Trading Places, the Duke brothers lose money by speculating in the frozen orange juice concentrate futures market.

False

T/F: Increased market coordination has led to more independent decision making by players in the agri-food system

False

T/F: Increasing incomes are leading to more emphasis placed on product price and less emphasis placed on food quality attributes.

True

T/F: Milk is likely to have a more inelastic demand than Prime Rib or a New York Strip Steak

True

T/F: More than 95% of the farms in the U.S. are family farms (owned and operated by a family member).

False

T/F: Most agricultural commodities can be grown anywhere in the world.

True

T/F: Most futures contracts are closed by offsetting trade

False

T/F: Most of the people who trade futures are hedgers

True

T/F: On average, Americans spend approximately 10% or less of their income on food.

False

T/F: Prices in the futures and cash markets move in opposite directions and therefore offset each other.

True

T/F: Small-scale farms account for the majority of all farm assets.

False

T/F: Sysco, a company who supplies many Michigan restaurants and hospitals with food products, is an example of a grocery wholesaler.

True

T/F: The Food Marketing Bill measures all of the value added in the agri-food system by firms once the product leaves the domestic farm gate.

True

T/F: The U.S. population is expected to grow more diverse ethnically in the foreseeable future; one implication of this is that we will likely observe an increase in the consumption of rice and fish.

True

T/F: The elasticity of supply is always positive

True

T/F: The elasticity of supply is used to measure a movement along the supply curve

False

T/F: The elasticity of supply is used to measure how responsive the quantity supplied is to a change in an input price

True

T/F: The greater a food product's share of the consumer budget, the greater elasticity of demand for that product

False

T/F: The more inelastic demand is, the larger the change in quantity when price changes.

True

T/F: The more substitutes a food product has, the greater elasticity of demand

True

T/F: Two players in the agri-food system who typically do not add form value are the assembler and the wholesaler.

False

T/F: If the demand curve is perfectly elastic for a certain product, then an increase in the supply will result in a lower price for that product, but there will be no change in the quantity traded in the market.

False

T/F: The farmer is the driving force in the agri-food system.

Grains, such as soybeans, corn and wheat

The Chicago Board of Trade/CME Group would be the exchange to go to if you wanted to trade: a. Metals, such as gold, silver and platinum b. Grains, such as soybeans, corn and wheat c. Soft commodities, such as sugar, coffee and cocoa d. None of the above is traded at the Chicago Board of Trade/CME Group

Consumers' preferences for products often change with the seasons

The U.S. agri-food system is unique relative to the supply chains for other consumer products. Of the following items, which would not be considered an impact due to the biological uniqueness of the agri-food system? a. Consumers' preferences for products often change with the seasons b. Many agricultural products are perishable and need to reach consumers quickly c. Production lags result since agricultural products take time to produce d. Quality difference occur between commodity and food products (i.e., apples are not identical).

$1.3-1.6 trillion

The approximate value of total expenditures on food and alcohol in the U.S. is:

Buys raw corn from an assembler and sells Corn Flakes to wholesalers

There is a trend for firms to combine processing and manufacturing. Suppose Kellogg's follows this trend for its production of Kellogg's Corn Flakes boxed cereal. In this case, which of the options listed below would best describe Kellogg's activities in the agrifood system? a. Buys raw corn from farmers and sells milled corn to a competitor, such as General Mills b. Buys raw corn from an assembler and sells Corn Flakes to agricultural input suppliers. c. Buys raw corn from an assembler and sells Corn Flakes to wholesalers. d. Buys milled corn from another company and sells Corn Flakes to the final consumer.

It was just reported that El Nino was delaying a sugar harvest in Brazil, the world's largest producer of sugar cane

Which of the following could best help explain why the OCT19 futures contract price for sugar increased 2 cents (a significant increase) on September 19, 2019? a. Since Halloween is always in October, people eat a lot of candy during that month. b. It was just reported that El Nino was delaying sugar harvest in Brazil, the world's largest producer of sugar cane. c. A new government policy was announced that allowed for unlimited imports of sugar into the U.S. d. None of the above

Increasing per capita consumption of food

Which of the following has not been a strong force behind increasing food expenditures in the U.S.? a. Consumer preferences for convenient, more processed foods. b. Increasing per capita consumption of food c. Higher labor and energy costs in the agri-food system d. The increasing trend in food consumed away from home

A producer will always make more money if he or she hedges than if he/she did not

Which of the following is false? a. Less than 5% of all futures contracts typically result in actual delivery of the commodity b. A producer will always make more money if he or she hedges than if he/she did not. c. A speculator in the futures market neither owns for intends to own the commodity in the futures contract d. When individuals who want to trade futures deposit funds with a brokerage firm in a margin account, typically only 5% of the overall value of the trade must be deposited

Processors tend to advertise their product to the final consumer

Which of the following is generally false regarding the role of the processor? a. Processors are typically the first player to change a commodity's form once it leaves the firm b. Processors tend to advertise their product to the final consumer c. There is a trend for processors to merge with manufacturers d. There is a trend for processors to merge with assemblers

The role of place value is decreased when commodities are geographically limited as to where they can be grown.

Which of the following is likely false? a. A robotic apple harvester is an example of asset specificity. b. The role of place value is decreased when commodities are geographically limited as to where they can be grown. c. If there is a high degree of asset specificity in the food system, this will increase the fixed costs of firms and make production adjustments costly and slow. d. Agricultural prices tend to fluctuate throughout the year

If a new production technology reduces the cost of producing potatoes, the supply curve for potatoes is likely to decrase

Which of the following is most likely false? a. An increase in the price of pesticides used in potato production will cause a decrease in the supply curve for potatoes. b. If a new production technology reduces the cost of producing potatoes, the supply curve for potatoes is likely to decrease. c. A change in the price of potatoes will cause a movement along the supply curve for potatoes, everything else held constant. d. The supply curve for potatoes is based on the cost of production of the potato farms

Since 1960, the share of income spent on food away from home has been decreasing

Which of the following is most likely false? a. Per-capita calorie consumption in the U.S. is approximately 3500 calories a day b. Current retail food prices are approximately twice as much as they were in 1988. c. Since 1960, the share of income spent on food away from home has been decreasing. d. Understanding and predicting consumer trends is critical for decision making in the agri-food system

Nearly 25% of all agricultural production in the U.S. is exported

Which of the following is most likely true regarding agricultural production in the U.S.? a. Nearly 25% of all agricultural production in the U.S. is exported. b. Small farms account for the majority of farm production c. There are approximately 1 million farms in the U.S. d. Most farms in the U.S. are large-scale, corporate farms

Contracts are traded based on information today about perceptions of price in the future

Which of the following is most likely true? a. The laws of supply and demand do not apply to futures markets, since actual goods are not physically being traded in futures markets. b. Commodity price is standardized in a futures contract. c. Contracts are traded based on information today about perceptions of price in the future d. All persons selling a futures contract must be in possession of the commodity at the time he/she sells on the futures market.

Imports and alcohol are included when calculating the Food Bill

Which of the following is true regarding the tools used to measure the value-added in the agri-food system? a. The Food Dollar is an accurate tool to use if you wanted to determine how much U.S. consumers spend on all food and alcohol in a given year. b. The Food Bill is a useful tool for measuring all of the value-added in the agri-food systems by firms once the commodity leaves the domestic farm gate. c. Imports and alcohol are included when calculating the Food Bill. d. The Food Marketing Bill is typically larger than the Food Bill

In general, Americans have one of the smallest shares of income spent on food in the world

Which of the following is true? a. Per-capita consumption of food has been increasing significantly in the past 25 years. b. In the future, the largest increase in food sales in the U.S. will come from reaching Americans who currently do not eat enough food. c. In general, Americans have one of the smallest shares of income spent on food in the world. d. None of the above are true

An ethanol plant who wants to hedge the corn it needs to make ethanol

Which of the following players would be most likely to buy a corn contract for his first move in the futures market? a. A farmer who wants to hedge the corn crop he plans to sell next year. b. A speculator who thinks price is going to decrease c. An ethanol plant who wants to hedge the corn it needs to make ethanol d. All of the above

None of the above

Which of the following players would most likely sell a soybean oil contract for its first move in the futures market? a. Kraft who uses soybean oil to make its salad dressing b. A company such as Pacific Biodiesel which turns soybean oil into biodiesel for fuel for its diesel engines c. A speculator who thinks price is going to decrease d. None of the above

A farmer planting seed and harvesting a crop

Which of the following provides the best example of a firm adding form value? a. A large retail store advertising food products. b. A trucking company moving grain from MI to IN c. A grain elevator storing corn after the fall harvest. d. A farmer planting seed and harvesting a crop.

Per capita egg consumption is likely to decrease in the future

Which of the following statements is false regarding how changing demographics (i.e., age, income, and ethnicity) will influence the future of the U.S. agri-food system? a. As the baby-boomers age, they will be less likely to eat out than younger Americans. b. Per capita dairy consumption is likely to decrease in the future c. Increased importance will be placed on functional foods. d. Per capita egg consumption is likely to decrease in the future.

The U.S. is the leading exporter of agricultural products, but ranks fifth in agricultural imports.

Which of the following statements regarding the agri-food system and globalization is most likely false? a. Canada and Mexico are two of our leading agricultural trading partners - they are both in our top 4 import sources and export destinations. b. The U.S. is the leading exporter of agricultural products, but ranks fifth in agricultural imports. c. International trade increases the value of U.S. agricultural production d. The U.S. has a positive agricultural trade balance

All of the above are false

Which of the following trends is most likely true? a. The farm share of the food dollar has been increasing over time. b. The food marketing bill has been decreasing over time c. The food bill has been decreasing over time d. All of the above are false

The close proximity of production and processing of sugar beets in the fertile soils of the Saginaw Bay area

Which of the following would be considered the best example of geographic concentration? a. The close proximity of production and processing of sugar beets in the fertile soils of the Saginaw Bay area b. The manufacturing dominance in the breakfast cereal industry by the top four firms c. The shipping of soybeans from MI to global markets d. The potential for soybeans to be grown in many states across the U.S.

An increase in the price of an alternative good such as oranges

Which of the following would cause a shift in the demand for apples? a. A change in the supply of apples b. A increase in the price of an alternative good such as oranges c. An increase in the amount of apples imported to the U.S. from Poland d. A new robotic apple harvesting machine

Barilla penne pasta

Which of the following would least likely be considered a "functional food"? a. POM pomegranate juice b. Lifeway Kefir yogurt c. Glaceau Vitamin water d. Barilla penne pasta

US Foods

Which of the following would least likely be considered a food manufacturer? a. Mondelez International b. Pinnacle Foods c. Unilever d. US Foods

Milk is likely to have a smaller farm share of the food dollar than ice cream

Which of the following would most likely be considered false? a. Most food products go through 5 to 7 changes of possession before they reach the final consumer b. The average food product travels more than 1,000 miles before it reaches the final consumer c. Marketing is done by all players in the agri-food system d. Milk is likely to have a smaller farm share of the food dollar than ice cream.

An increase in demand for corn chips

Which of the following would most likely cause a movement along the supply curve? a. An increase in the number of acres planted to corn b. A drought that damages the corn crop c. A decrease in the price of fertilizer d. An increase in the demand for corn chips

Reduce price risk

Which of the following would not be considered a goal of the speculator? a. Reduce price risk b. Buy low and sell high c. Make a profit in the futures market d. Sell high and buy low

A change in the price of fertilizer used to produce wheat

Which of the following would shift the supply of wheat? a. A change in the price of fertilizer used to produce wheat b. A change in the price of wheat c. A decrease in bread consumption due to more consumers following low-carb diets. d. An increase in the U.S. population

The manufacturer

Which player is least likely to be geographically located near the farmer? a. The agricultural input supplier b. The manufacturer c. The processor d. The assembler