Agricultural Economics, Introduction to Economics Test Exam for
Beginners Latest Update
Industry - ANSWER-a group of firms that produce and sell the same or very similar products structure
refers to how individual participants behave and influence prices
Perfect Competition
ANSWER
Large number of buyers and sellers
Homogenous products
Freedom of entry and exit
Perfect information
Output price does not change based on the decisions of one individual firm firms are "price takers"
TRP - ANSWER-Total Revenue Product
Total Revenue Product - ANSWER-(TPP)(Py), Dollar value of output produced from alternative levels of
variable input
Profit Maximization - ANSWER-Calculation the biggest positive difference between TRP (benefits) and
TFC (costs)
This number represents what is left over after purchasing all of the variable inputs, so it is what is left to
pay for the "fixed" inputs
Since "fixed" input cost is constant, maximizing the difference between TRP and TFC will reveal the
profit maximizing level of input usage
T Fac. Cost - ANSWER-Total Factor Cost
, Total Factor Cost - ANSWER-(X)(Px)
Total cost of the variable inputs at the alternative levels of input usage
Profit Maximization (2) - ANSWER-Does not mean you will make a profit, (accounting or economic) it
means you cannot do any better (it’s the best you can do)
Profit Maximizing - ANSWER-Profit Maximizing level of input use can change if price of output (Py)
changes, price of variable input (Px) changes, technology (shape of production function, relationship
between inputs and output) changes
MRP - ANSWER-Marginal Revenue Product
Marginal Revenue Product - ANSWER- (Change in TRP/Change in X) or (MPP*Py)
Additional value of output obtained from each additional unit of the variable input
MFC - ANSWER-Marginal Factor Cost
Marginal Factor Cost - ANSWER- (Change in TFC/Change in X) or (Px), Cost on an additional unit of
input
Amount added to Total Cost for using one more unit of variable input
Marginal Factor Costs (MFC) - ANSWER-Always set Marginal Revenue Product (MRP) equal to.
Profit - ANSWER-TR (Total Revenue) - TC (Total Cost)
TR - ANSWER-Amount of Money received when the producer sells the Product of Output
TC - ANSWER-Cost of all inputs (variable and fixed) used to produce output
MC graph - ANSWER-Nike swoosh
Y - ANSWER-Optimal Level of Output
Negative Profits (box) - ANSWER-If Py < ATC
Beginners Latest Update
Industry - ANSWER-a group of firms that produce and sell the same or very similar products structure
refers to how individual participants behave and influence prices
Perfect Competition
ANSWER
Large number of buyers and sellers
Homogenous products
Freedom of entry and exit
Perfect information
Output price does not change based on the decisions of one individual firm firms are "price takers"
TRP - ANSWER-Total Revenue Product
Total Revenue Product - ANSWER-(TPP)(Py), Dollar value of output produced from alternative levels of
variable input
Profit Maximization - ANSWER-Calculation the biggest positive difference between TRP (benefits) and
TFC (costs)
This number represents what is left over after purchasing all of the variable inputs, so it is what is left to
pay for the "fixed" inputs
Since "fixed" input cost is constant, maximizing the difference between TRP and TFC will reveal the
profit maximizing level of input usage
T Fac. Cost - ANSWER-Total Factor Cost
, Total Factor Cost - ANSWER-(X)(Px)
Total cost of the variable inputs at the alternative levels of input usage
Profit Maximization (2) - ANSWER-Does not mean you will make a profit, (accounting or economic) it
means you cannot do any better (it’s the best you can do)
Profit Maximizing - ANSWER-Profit Maximizing level of input use can change if price of output (Py)
changes, price of variable input (Px) changes, technology (shape of production function, relationship
between inputs and output) changes
MRP - ANSWER-Marginal Revenue Product
Marginal Revenue Product - ANSWER- (Change in TRP/Change in X) or (MPP*Py)
Additional value of output obtained from each additional unit of the variable input
MFC - ANSWER-Marginal Factor Cost
Marginal Factor Cost - ANSWER- (Change in TFC/Change in X) or (Px), Cost on an additional unit of
input
Amount added to Total Cost for using one more unit of variable input
Marginal Factor Costs (MFC) - ANSWER-Always set Marginal Revenue Product (MRP) equal to.
Profit - ANSWER-TR (Total Revenue) - TC (Total Cost)
TR - ANSWER-Amount of Money received when the producer sells the Product of Output
TC - ANSWER-Cost of all inputs (variable and fixed) used to produce output
MC graph - ANSWER-Nike swoosh
Y - ANSWER-Optimal Level of Output
Negative Profits (box) - ANSWER-If Py < ATC
