AG Business Intro Quiz 2
market
A _________ is established whenever potential buyers and potential sellers interact to establish prices and exchange goods.
marketplace
A market is distinguished from a _______________. The former refers to interaction of buyers & sellers, and the latter to a physical location.
economic model
A model usually will include... Some assumptions about human behavior. Other assumptions about the institutional environment in which a particular form of human behavior takes place
opportunity cost
A powerful economics concept is ______________ ______
for whom
Addressing the "____ ________" question for goods considered necessary for all citizens, a number of programs designed to transfer economic power from the relatively rich to the relatively poor. The progressive income tax system, Medicare, public education, food stamps, and the Social Security system.
value
All economic resources have _______. _________ is sometimes determined in a marketplace where the user of a resource pays the prevailing price for the use of the resource. Other times, resources have economic value, but those resources are not purchased in the open market.
sovereignty
An advantage of the price system is consumer ___________ and freedom in economic decisions.
economic model
An expected pattern of economic behavior is called an ______________ __________. The basic building block in the logic of the economist.
price taker
As a _______ ________, the only decision each producer or consumer can make is a choice of whether or not to buy or sell at the market price. As the number of yes votes changes, so too will the price
decreases
As the consumer consumes additional units of a good, ceteris paribus, additional satisfaction or utility obtained by each unit _____________.
additional
At any given consumption level, economists focus on the economics of the marginal or ____________ unit.
reality
At best, economic models approximate ________ in a manner that enhances our ability to conceptualize and simplify the real world we are examining. Models provide the economist with an internally consistent mechanism for conceptualizing problems. They force the economist to reason in a systematic, deductive manner.
free market
At one extreme of possible allocation mechanisms lies the ______ _________ or price system.
command
At the other extreme is the ___________ system. All decisions are made by a central planning agency or other administrative individual such as an absolute dictator or tribal chief.
micro
Because "_______" management decisions each must make are predicated on existing "macro" economic situation.
individual
Each ___________ takes the market price. All ____________s together determine/make the market price
financial resources
Each individual producer and consumer, restricted only by ____________ _____________, is free to choose what, how, how much, and when to produce or consume. Financial resources of each consumer resolves the "for whom" question.
Microeconomics, Market economics, Macroeconomics.
Economics can be divided into three parts: __________________, _________ _____________. ____________________
economic
Every ___________ system must resolve five basic issues: What to produce. How to produce it. How much to produce. When to produce. For whom to produce.
what
Every economic system must resolve five basic issues: ... 1. _______ to produce
how
Every economic system must resolve five basic issues: ... 2. _____ to produce it
how much
Every economic system must resolve five basic issues: ... 3. _____ _______ to produce
produce
Every economic system must resolve five basic issues: ... 4. when to ___________
whom
Every economic system must resolve five basic issues: ... 5. for _______ to produce
scarce
Every resource is relatively ________ , meaning the availability of every resource is insufficient to satisfy all of its potential users.
whole
Fallacy of Composition. Asserts that what is true of a part is, therefore, true of the ________.
Charles Wilson
Fallacy of Composition. A famous example is a statement by ___________ ___________, a former GM executive who served as President Eisenhower's Secretary of Defense. "What's good for General Motors is good for America.
group
Fallacy of Composition. In many situations, it is perfectly valid to reason that what is true for the individual must also be true for the _________.
society
Fallacy of Composition.A spectator at a basketball game can improve his view of the game by standing. By so doing he is better off, but __________ as a whole is worse off, because he destroys the view for many others
composition
Fallacy of Composition.In making the fallacy of _______________ the spectator would declare: "If I stand up, I can see better." "Thus, if everyone stood up, everyone could see better."
self-interest
Fallacy of Composition.There are instances where individual ______-__________ may not be in the best interest of the group. The cases where fallacy of composition appears.
Time, Place, Form, Possession.
Four changes occur in the marketing of a good... ______,________,_______,____________
profit, capital, resources
Frequent disagreement among economists on the exact meaning of specific words. Examples are "_______," "___________," and "______________."
nonmarket
Frequently called public or _____________ goods, these include education, national defense, and fire protection.
happens
From the economist's perspective, everything ___________ on the margin.
validity
In a price system, the old adage, that the "rich get richer and the poor get poorer," has some __________.
marginal
In economics, the term __________ refers to an additional or an incremental unit of something.
diminishing returns
In the economics of production and consumption, the concept of _______________ ___________ is central to the process of economizing.
resource
In the latter case, economists use the principle of opportunity cost to determine the economic value of a __________. Though there is no manifest market price of that resource.
price taker
In the neoclassical model, each participant in a market is a _______ ________. Collective decisions of all participants in a market determine the price that all take.
macroeconomics
Issues form the material part of __________________ Unemployment & inflation rates, the balance of payments, and the federal deficit.
the price system
It does have shortcomings, which even its most ardent supporters recognize.
economists
It is impossible for _______________ to explain, much less predict all behavior—different people act differently. As a general rule, people act in similar, predictable ways
margin
It is on the __________ where economic decisions are made.
macro
Macroeconomics ..Economic system performance at the ______ level is important to agricultural producers or consumers.
logical fallacies
Many economists go astray because fall into one of four logical traps known to snare large numbers of agricultural economics students. And an occasional professor as well.
economists
Many words generally accepted by _____________ are used by non-______________ in a very different way. The student begins study thinking he/she knows what words such as "demand," "savings," and "rent" mean. Discovering that to _____________, these words mean something entirely different.
economic
Most ____________ analyses deal not with the marginal value of production or consumption.
marginality
One of the greatest contributions of economics is the concept of __________________.
increase
Regardless of current level of satisfaction or utility, if the marginal utility is greater than the marginal cost, the consumer can ___________ total utility by consuming the marginal unit. The same basic principle applies to production as well
value system
Since economics inevitably must deal with the ________ ___________of individuals and society, it is important to distinguish among facts, beliefs, and values.
economics
Since economics is about decision making & allocation, without choices there would be no need for ______________.
Correlation
The Correlation-Causation Fallacy.... _________________ refers to two events that share some sort of mutual relationship in a regular, predictable fashion.
Causation
The Correlation-Causation Fallacy...._____________ refers to two events in which there is a cause-and-effect relationship between the two.
mutual
The Correlation-Causation Fallacy...Frequently, events that are correlated behave in a _________ relationship because they are both related in a causative fashion to some third event.
correlated, causative
The Correlation-Causation Fallacy...The fallacy is assuming that if two events are ______________, they must be related in some sort of _____________ manner.
correlation
The Correlation-Causation Fallacy...When two events have a causal relationship, they also have a _______________.
economic transactions
The Zero-Sum Game Fallacy ..As long as ____________ ________________ are conducted with neither coercion nor constraint, an increase in the value held by one participant does not necessarily have to be the result of a decrease in the value held by the other. Usually, both should be better off.
money
The Zero-Sum Game Fallacy ..The basis of economics is exchange—usually a good or service is exchanged for _________.
too high
The Zero-Sum Game Fallacy ..The farmer sells his wheat to an elevator, and buys his fertilizer from a supply store. As with most of us, the farmer thinks the price he receives as a seller is "too low," and the price he pays as a buyer is "______ ________."
better
The Zero-Sum Game Fallacy ..The skeptic would claim that in a transaction the buyer and seller both emerge equally worse off. To the contrary, both are __________ off, for each has acquired something he wanted more than what he had. If they hadn't, they would never have traded in the first place.
gains, lose
The Zero-Sum Game Fallacy ..This fallacy, easily stated, is common in economics: If someone _______, someone else must ______.
middlemen
The Zero-Sum Game Fallacy ..This is the heart of the nearly universal suspicion that both producers and consumers are repeatedly exploited by "______________." Often expressed by the question: "Who got the better part of the deal?
primary price
The __________ _________ determination mechanism found in the institutional framework of most countries.
political process
The ____________ _______________ is the primary mechanism for converting socially affirmed values to policies & programs.
microeconomics of production
The ____________________ ___ ________________ examines the economics of the individual producer or firm. As that firm acquires resources and combines them in the production process to earn as much profit as possible.
Diminishing returns
The basic idea of ___________________ _________ is that as you increase the amount of something, ceteris paribus will eventually increase at a decreasing rate.
unequivocal nomenclature
The failure of economics to develop ___________ _________________ leads to two serious difficulties. Both of which make the study of economics more excruciatingly painful than it should otherwise be.
diminishing
The idea of diminishing returns is expressed in the "law of ________________ marginal utility."
aggregation
The important distinction is the level of _______________ of the analysis—as the level of aggregation changes, economic tools must also change.
fabric
The institutional _______ of the U.S. includes a pure command allocation system for some public goods, and a mixed price/command system for others.
international
The macroeconomist also deals with _____________ issues.
scientific
The objective of any ___________ inquiry is to... Observe & describe a particular range of phenomena. Organize those observations into recognizable patterns. Formulate "laws" where sufficient regularity warrants. The laws give scientist a basis on which to make predictions
behavior
The other branch of microeconomics deals with the __________ of the individual consumer. Hence, the microeconomics of consumption.
efficient
The price system is a very ___________ mechanism for the "what," "how," "how much,"& "when" decisions.
question
The relevant economic _______________ of the consumer should be... Is the marginal utility associated with one additional unit greater than the marginal cost of acquiring that unit?
economist
The role of the ____________ is to devise rules for making decisions in an ever-changing, uncertain economic environment. These rules can be used to make production, consumption, marketing, and financial decisions.
analytical scientist.
The study of agricultural economics provides the student with an opportunity to explore phenomena common to everyday life from the perspective of an _____________ __________________
Self-interest, scarcity, choice
The study of economics rests on three foundations: ______-___________, ____________, and ________
resources
The word "____________" describes anything tangible: Wheat, barbed wire, hamburgers, water, labor, clean air.
efficiently
There are a number of resources that a price system cannot ____________ allocate.
avoided
These basic questions must be answered in each society—they simply cannot be ___________. Institutional & political systems of each society determine the manner in which these decisions will be made.
Ceteris paribus
Use of ________ ____________ gives economics much of the logical rigor required in a scientific inquiry.
optimizing
Using marginal analyses, we are able to determine economic _____________ behavior. Ignoring total costs or returns & concentrating on marginal costs and returns, we are able to focus on the economizing process.
valid
What is valid logic in dealing with the economics of the individual may not necessarily be _______ in dealing with the economics of a group or an entire society
allocation
Without scarcity, there would be no need for an _______________ system.
Self-interest
_____-____________ is what drives the consumer to seek more "stuff " at a lower price. It also drives the producer to produce as efficiently as possible—all economic activity is driven by self-interest.
land
______ is a scarce resource
Facts
_______ are what we know to be the case.
price
_______ refers to a per-unit concept
cost
_______ refers to a total concept of price times quantity purchased
Ceteris paribus
________ ___________ is a Latin phrase that roughly translates to "everything else being equal." Generally any economic principle is valid only when all other external factors remain the same.
Values
________ are what we think should be the case
Choice
________ is important, because without choices there is no decision to be made
Market economics
_________ _______________ encompasses the study of the dealings in a particular commodity by all potential buyers and potential sellers, taken as a group.
Scarcity
_________ creates the need for a system to allocate the available resource among some of those potential users.
Beliefs
__________ are what we think to be the case.
Economics
__________ is a social science, and social scientists must deal with the laws of human nature. As humans are not consistent in their behavior, the laws of the social scientist are less reliable & more open to exception than those of physical or biological scientists. Nevertheless, economic behavior of most persons is generally consistent, and thus, predictable to a degree.
Political
___________ institutions of the U.S. fully embrace a price system for allocating resources. With some adjustments to correct for some difficulties.
Marginal utility
____________ _________ refers to the additional utility or satisfaction associated with one additional unit of a good being consumed—ceteris paribus.
consumers
_____________ always want more
Economics
_____________ is that particular social science that deals with the allocation of scarce resources among an unlimited number of competing alternative uses.
Opportunity cost
______________ ______ is the economic value of a resource in its highest value alternative use.
Production management
______________ ___________________ decisions that affect the profit of the firm include: Which inputs to purchase. What production technique to use. Which product to produce. How much of each product to produce. When to produce them.
Advantages
______________ of a command system are that it is very effective in allocating public goods. And can be quite egalitarian in "for whom" decisions.
Disadvantages
_______________ of such an allocation system are loss of individual freedom in economic decisions. And inherent inefficiencies of central planning agencies.
Microeconomics
________________ deals with the economics of individual producers and consumers.
Macroeconomics
_________________ deals with the impact of public policies such as food stamps, pesticide controls, or agricultural price supports. On each sector of the economy individually, and the entire economy collectively.
Agricultural economics
__________________ ______________ is the social science that deals with the allocation of scarce resources among competing alternative uses found in the production, processing, distribution, and consumption of food and fiber.
Macroeconomics
___________________ considers the entire economics system, usually at the national or international level. How the total economic system operates. How various policies & institutions affect system vitality.
decreasing
diminishing returns...In practice, if you add additional units of fertilizer to a fixed amount of land, eventually response per unit of fertilizer begins to increase at a _________________ rate.
additional
diminishing returns...On the production side, the concept is embodied in the "law of diminishing marginal product." If you add _______________ input units to fixed amounts of other inputs, additional production will eventually decrease.
production, consumption
diminishing returns...The concept of diminishing returns applies to both ___________________ and __________________ Not precluding the possibility of increasing returns over some range of production or consumption. Eventually, diminishing returns set in & become negative. Too much fertilizer can burn the crop, with negative returns.
increases
diminishing returns...What this law says is that the amount of total utility gained from consuming a good eventually _____________ at a decreasing rate. Assuming consumption of everything else stays constant.
returns
marginality.. As additional units of fertilizer are applied to a given amount of land, ceteris paribus. Incremental or marginal _________ to that fertilizer decline.
scarcity
microeconomics: Each consumer faces the inevitability of _________ in the form of a limited budget. Given this _________, each consumer uses his/her sovereignty to resolve the "for whom" allocative decision
for whom
microeconomics: The "____ _______" consumption decisions a price system entails may be modified. By subsidized school breakfast and lunch programs, food stamps, and other government programs.
individual
microeconomics: The _______________ consumer must make a number of consumption decisions on a daily basis. Many not the products of conscious deliberation. But are habitual or impulsive. The consumer must decide what to buy & what not to buy The consumer must also decide when to consume.
purchase
microeconomics: The consumer is faced with the economic problem of deciding what to ____________ with limited resources. Such as money and time.
economic
studying logic of these managerial rules, a student can learn to adjust decisions to changing environments in which __________ activity occurs.
same
the key to microeconomics is that not all firms will do the ______ thing
after this, therefore because of this
the post hoc fallacy...In Latin, described as "post hoc, ergo propter hoc." Which translates to "_______ _______ _____________,_____________ ____ _______"
precedes
the post hoc fallacy...The fallacy is the belief that because one event ____________ another, the first causes the second. The proud rooster, convinced that his crowing causes the sun to rise, is guilty of this fallacy.
goods, bads
there are economic ________ and economic ______