Agribusiness Management Quiz and Exam 1

Functions of Management

Designing, aligning, arranging, and guiding

Sections of Management

Marketing, finance, supply chain, and human capital

Dunning-Kruger Effect

Bias from an overestimation or underestimation of one's own abilities

Ag Economics Core

Explore what drives human and firm decision-making;

Understanding how humans, firms, and governments respond to incentives; Applying insights to policies and programs

Opportunity Cost

What we give up when we choose one thing over another

Production Possibilities Frontier (PPF)

Opportunity costs demonstrated graphically, typically bowed/curved

Marginal Decision Making

Decision-making based on an additional unit of production or consumption

Marginal Cost

Additional cost of producing or consuming a unit

Marginal Benefit

Additional benefit of producing or consuming a unit

Sunk Cost

Costs that have already been paid

Demand

The inverse relationship between the price of a good/service and the quantity demanded for that good/service

Conditions of Demand

Population in the relevant region, Price of alternatives

Price of complementary goods, Societal norms, Predicted future conditions, Income of the local population

Supply

The representation of the positive relationship between the price of a good or service and the quantity a producer is willing to produce or sell

Conditions of Supply

Number of firms in the market, Change in price of inputs, Change in technology, Change in regulations, Change in expectations

The Law of One Price

Total price = transaction price + transaction cost

What happens if the Transaction Price is 0?

All prices will trend towards equilibrium

Arbitrage

Making a profit from the differing prices across markets

Cost-Benefit Analysis

Marginal Benefits - Marginal Costs = Net Marginal Benefits (MB - MC = NMB)

Unique Components of Agribusiness

Value creation in biological goods, Seasonality, Rural opportunities

Supply Chain

The process that allows producers to operate and transform agricultural products

Supply Chain Sectors (in order)

Input supplier > Producer > Commodity Processor/Manufacturer > Food and Fiber Distributer > Food and Fiber Retailer

Processor

Makes raw products more appealing

Manufacturer

Transforms raw products into a new form

Which sector can exist on its own?

Production

What is the purpose of all the other sectors?

To increase value or convenience

Revenue

Price x Quantity Sold

Profit

Revenue - Cost

Total Cost

Variable Cost + Fixed Cost

Profit Margins

(Revenue - Cost)/Revenue

Michalowicz's Business Hierarchy of Needs

Legacy

Impact

Order

Profit

Sales