AGB 212 FINAL STUDY GUIDE 2026
4 Principles of Economics - Answers - 1. There is value in trade
2. No such thing as a free lunch
3. Incentives matter
4. Resources are scarce
4 types of resources - Answers - Manufactures, human, natural, biological
Opportunity Cost - Answers - Cost of next best alternative
Specialization - Answers - When one company/country etc. focuses their efforts on
becoming efficient in one area, rather than multiple. Eliminates self-sufficiency.
Gains from trade - Answers - Every area can get everything that it needs, and enough
of what it needs
Microeconomics - Answers - smaller level, for example one business instead of the
whole market.
Macroeconomics - Answers - the study of the entire market.
Fallacy of composition - Answers - Something that is true at the individual level is not
necessarily true for the aggregate.
Positive Economics - Answers - asks questions like "what is" and "what would happen
if."
Normative Economics - Answers - asks questions like "what should be."
Gini coefficient - Answers - a measure of equality within the economy. Close to 0 is
perfectly equal, 1 is perfectly unequal. US's went from .463 to .477.
Thomas Piketty's argument - Answers - inequality in wealth is dangerous because it
causes stagnant economic growth. He proposes a global tax.
Supply chain in the food and fiber industry - Answers - Input Supply Sector »
Production (Farm) Sector » Processing/Manufacturing Sector » Wholesale/Retail Sector
» Consumer
Ag industry GDP - Answers - 12-15% of total GDP.
Jobs in Ag - Answers - Employs 1 in 6 people
, Price Index - Answers - Helps us determine percentages of price change for products.
Quantity Index - Answers - Helps us determine percentages of quantity change in
production.
Consumer Price Index (CPI) - Answers - Summation of price change among all
products.
Nominal values - Answers - have not been adjusted for inflation
Real values - Answers - have been adjusted for inflation
Physical Structure of farming (3) - Answers - Large # of small farms, increasing amt. of
capital spent relative to labor, increasing amt. of output per unit of input
Financial Structure of farming (3) - Answers - Nominal income growth, strengthening
equity positions, recovering real estate values.
Trends in farm inputs (2) - Answers - becoming more technological. Total input has
remained steady since WWII.
Trends in farm outputs (2) - Answers - becoming higher per unit of input. Avg growth is
2%/yr.
Engel's Law - Answers - As incomes rise, the proportion of money spent on food
decreases.
Total utility - Answers - Total "happieness" gained by consuming a good.
Marginal utility - Answers - The amount of utils that we gain from the next number of a
good consumed. Goes to 0 at the peak of the total utility curve
Law of diminishing marginal utility - Answers - As we consume more of a product, the
amount of utility that we gain per good becomes less.
Iso-utility curves - Answers - We gain the same amount of utility anywhere along this
curve.
Marginal rate of substitution - Answers - The amount of one good that we are willing to
give up to gain one unit of another good. This is the slope of the indifference curve
Budget constraint - Answers - How much money a person has to spend on certain
goods within a time rame (month, etc).
4 Principles of Economics - Answers - 1. There is value in trade
2. No such thing as a free lunch
3. Incentives matter
4. Resources are scarce
4 types of resources - Answers - Manufactures, human, natural, biological
Opportunity Cost - Answers - Cost of next best alternative
Specialization - Answers - When one company/country etc. focuses their efforts on
becoming efficient in one area, rather than multiple. Eliminates self-sufficiency.
Gains from trade - Answers - Every area can get everything that it needs, and enough
of what it needs
Microeconomics - Answers - smaller level, for example one business instead of the
whole market.
Macroeconomics - Answers - the study of the entire market.
Fallacy of composition - Answers - Something that is true at the individual level is not
necessarily true for the aggregate.
Positive Economics - Answers - asks questions like "what is" and "what would happen
if."
Normative Economics - Answers - asks questions like "what should be."
Gini coefficient - Answers - a measure of equality within the economy. Close to 0 is
perfectly equal, 1 is perfectly unequal. US's went from .463 to .477.
Thomas Piketty's argument - Answers - inequality in wealth is dangerous because it
causes stagnant economic growth. He proposes a global tax.
Supply chain in the food and fiber industry - Answers - Input Supply Sector »
Production (Farm) Sector » Processing/Manufacturing Sector » Wholesale/Retail Sector
» Consumer
Ag industry GDP - Answers - 12-15% of total GDP.
Jobs in Ag - Answers - Employs 1 in 6 people
, Price Index - Answers - Helps us determine percentages of price change for products.
Quantity Index - Answers - Helps us determine percentages of quantity change in
production.
Consumer Price Index (CPI) - Answers - Summation of price change among all
products.
Nominal values - Answers - have not been adjusted for inflation
Real values - Answers - have been adjusted for inflation
Physical Structure of farming (3) - Answers - Large # of small farms, increasing amt. of
capital spent relative to labor, increasing amt. of output per unit of input
Financial Structure of farming (3) - Answers - Nominal income growth, strengthening
equity positions, recovering real estate values.
Trends in farm inputs (2) - Answers - becoming more technological. Total input has
remained steady since WWII.
Trends in farm outputs (2) - Answers - becoming higher per unit of input. Avg growth is
2%/yr.
Engel's Law - Answers - As incomes rise, the proportion of money spent on food
decreases.
Total utility - Answers - Total "happieness" gained by consuming a good.
Marginal utility - Answers - The amount of utils that we gain from the next number of a
good consumed. Goes to 0 at the peak of the total utility curve
Law of diminishing marginal utility - Answers - As we consume more of a product, the
amount of utility that we gain per good becomes less.
Iso-utility curves - Answers - We gain the same amount of utility anywhere along this
curve.
Marginal rate of substitution - Answers - The amount of one good that we are willing to
give up to gain one unit of another good. This is the slope of the indifference curve
Budget constraint - Answers - How much money a person has to spend on certain
goods within a time rame (month, etc).
