AEC 3133 MSU EXAM 1

Micro-economics - -Studies individual firm and household choices and behavior in individual markets Scarcity - -Having a limited budget, having more of one good thing means necessarily having less of another Scarce goods - -Goods that have higher prices and people with scare skills receive higher wages. Opportunity Cost - -The cost of something is not only the money you pay for it, but the time, effort (and sometimes sanity) you give up to get is as well. "There is no such thing as a free lunch" Example of Oppurtunity Cost - -If you saw a $10 bill lying in the ground, would you pick it up ? Yes. Why? Because the cost of doing so (spending 5 seconds of your time) is greatly outweighed by the benefits (having $10 more to spend). With opportunity cost, people respond based on __________. - -Incentives Market Signals of Incentives - -Price of Coke goes up , people may buy more Pepsi. Price of corn goes up, farmers produce less cotton. In 1990 Congress wanted to tax the rich. They did this by taxing yachts. It didn't work, why? - -To get away from this tax, the rich just did not buy yachts and instead bought other items such as: cars, houses, etc. Indifference - -All actions must be equally desirable, this describes an equilibrium where there are no incentives for people to modify their behavior. Transaction PRICE - -The money a buyer gives to the seller Transaction COST - -Is any other cost the buyer or seller incurs in the transaction Arbitrage - -The act of profiting from price differences across markets Economists make decisions __________. - -At the margin. Mississippi Mississippi If the marginal benefits of doing something exceed the marginal costs, then do it. If not, then don't. - - Marginal Benefit - -The additional benefit from doing something, above and beyond what you've already received. Marginal Cost - -The additional cost from doing something, above and beyond what you've already incurred. Sunk costs - -Costs that have already been incurred and cannot be recovered no matter what choice you make. Example of Sunk Cost - -In deciding to come to class this morning or sleep in, you won't get a refund on tuition no matter what you choose. That is a sunk cost. Model - -A highly simpler representation of a more complicated reality. Production Possibilities Curve (PPC) - -a curve measuring the maximum combination of outputs that can be obtained from a given number of inputs Efficiency - -getting as much benefit (or profit, output, or whatever you're trying to get) as possible given your available resources. There is a limit to what can be produced, given existing resources, time, etc. - - Every choice has an opportunity cost - you get more of something by giving up something else. - - Increasing Marginal Opportunity Cost - -In order to get remote of something, one must give up ever increasing quantities of something else Examples of increasing Marginal Opportunity cost: - -Land. A producer uses his best land first, but as his desire to increase production increases, he brings lower and lower quality land into use. Thus, for the same yields, he will need to work harder and harder using more and more inputs. Specializing and trading allows others to focus on the production of the good which each is best suited. - -For example; countries specializing in production of things for which is better suited and trading to other counties can improve all countries. The Food Marketing Channel - -Farm inputs, Farm processing, Food wholesalers, Food retailers, Consumers The Agri-Food System (Supply Chain) - -Suppliers, Farming, Processjng, Distribution, Retail, Consumers Mississippi Mississippi What is the #1 industry in the world? - -Agri-food What is the largest U.S share of world production? - -Soybean The primary driving force behind the success of U.S agribusiness is ....... - -Technology Processing/Manufacturing Sector - -Much of what happens in the sector is designed to provide consumers food in the time, place, and form they desire. Commodity Processors - -These processors take a raw agricultural commodity from a producer and process it into a form more acceptable to consumers and food manufacturers. Food manyfaxturers - -Mix raw agricultural commodities and processed food together to make a product that does not resemble the ingredients. Improvements in technology led to the development of two other stand-alone sectors of agricultural to go along with production. This includes: - -Processing-Manufacturing Sector & Input Sector AgriBusiness Manager - -The goal of every manager is to maximize the long-run profits of the firm by profitably satisfying customers' needs Revenue - Costs = Profit - - What are the functions of management? - -Planning, organizing, controlling, and directing (leading) Planning in Management - -Objective is to put firm in best possible position relative to future business conditions so the firm can maximize long run profits Organizing in Management - -Covers all issues surrounding how to set up a business. Biggest goal is to give employees a sense of belonging/influence Controlling in Management - -Involves giving management feedback on the firm's progress in achieving goals. The art of controlling is knowing when minor adjustments are needed and when a major overhaul is required. Directing (Leading) in Management - -Actual implementation of other three functions of management. This normally consumers 90% of a manager's time. This is all about leadership. What are the 4 key sections of management? - -Marketing, financial, supply chain, and human resource Mississippi Mississippi Marketing Management - -Understanding customer needs and effectively positioning and selling products and services in the marketplace Financial Management - -Generate the satay needed to make good financial decision, using the tools of finance to make effective decisions, and management assets, liabilities, and the owners investment in the firm Supply Chain Management - -Pushing for quality, lower costs, and making production more efficient in meeting consumers demands. Two parts of the supply chain management is? - -Operations Management - direction and control of the processes used to produce the goods and services. Logistics Management - the set of activities around storing and transporting goods and services. Human Resource Management - -The mechanics of the personnel administration and the finer points of motivating people to offer and contribute their maximum potential. "How to organize, how to motivate, how to hire, how to compensate" What makes a successful agri-food system? - -The success rests heavily on the adoption of technology and the application of good business management. How to be successful in Ag-Business - -- Be efficient : do things well at the lowest cost. -Be effective : do the right things and in the way customers want it done or they will not buy from you. - Enhance the economic well-being of customers and society. Successful Agri-Business Managers must be: - -Technically knowledgable , effective leaders, technically skilled, and able to mix the right proportions of these skills. Technical vs. Economic Efficiency - -New technology improves the technical efficiency of the system by increasing the amount of output per unit of input. Technical Efficiency - -Occurs when the level of output per unit of input is at a maximum and cannot be obtained with fewer inputs. Economic Efficiency - -Occurs when profits are maximized. Business Management - -The accomplishment of tasks through people Decision Making - -1. Identify the problem 2. Determine alternative courses of action 3. Analyzing the alternatives Mississippi Mississippi 4. Selecting the best alternative 5. Implementing the decision 6. Following up Management - -The ART and SCIENCE of successfully pursuing desired results with resources available to an organization