Opportunity costs are:

Opportunity costs are:

Answer: the cost of using a resource in one way based on the return that could be obtained from using it in the best alternative way

A measurable point where an increase in the addition of a variable cost item decreases the actual output of an enterprise is referred to as

A measurable point where an increase in the addition of a variable cost item decreases the actual output of an enterprise is referred to as

Answer: diminishing returns

The cost of producing one additional unit of output is called:

The cost of producing one additional unit of output is called:

Answer: marginal cost

Inflation means:

Inflation means:

Answer: the purchasing power of a dollar declines over time

The process of finding the present value of a dollar to be received at some future date is known as:

The process of finding the present value of a dollar to be received at some future date is known as:

Answer: discounting

Which of the following does not appear on the net worth statement?

Which of the following does not appear on the net worth statement?

Answer: net farm income

In developing an enterprise budget, crop insurance should be considered as:

In developing an enterprise budget, crop insurance should be considered as:

Answer: a variable cost.

The producer of a commodity which has an inelastic demand knows that:

The producer of a commodity which has an inelastic demand knows that:

Answer: if less is produced by the industry, total industry revenue will increase.

A legal document by which a property owner transfers the title of his land to someone to manage and safeguard for the benefit of beneficiaries is a:

A legal document by which a property owner transfers the title of his land to someone to manage and safeguard for the benefit of beneficiaries is a:

Answer: trust.

Rate of return on investment for a farm business is calculated by:

Rate of return on investment for a farm business is calculated by:

Answer: dividing return to capital by average total assets.

A banker loaning money to farm operators may require a cash flow analysis to:

A banker loaning money to farm operators may require a cash flow analysis to:

Answer: evaluate loan repayment potential.

Net farm income represents a return to what factors of production?

Net farm income represents a return to what factors of production?

Answer: management, capital, and unpaid operator and family labor

An advantage of making an estate the beneficiary of a life insurance policy is to:

An advantage of making an estate the beneficiary of a life insurance policy is to:

Answer: provide liquid funds to satisfy tax liability.

A feedlot operator purchased 100 feeder steers with an average weight of 700 pounds and sold them at an average weight of 1050 pounds. Total feed cost for the pen was $18,000. Feed cost per pound of gain was equal to:

A feedlot operator purchased 100 feeder steers with an average weight of 700 pounds and sold them at an average weight of 1050 pounds. Total feed cost for the pen was $18,000. Feed cost per pound of gain was equal to:

Answer: $0.514

A livestock producer wishing to use futures markets to hedge the price of cattle to be sold in the future would initially:

A livestock producer wishing to use futures markets to hedge the price of cattle to be sold in the future would initially:

Answer: sell futures contracts expecting to buy them back when he sells his cattle.

Accrued interest on a balance sheet refers to:

Accrued interest on a balance sheet refers to:

Answer: interest that has accumulated since the last loan payment

If a hedger is to carry a hedge through completion, the hedger:

If a hedger is to carry a hedge through completion, the hedger:

Answer: must be prepared to meet all margin calls.

A dollar received tomorrow can be worth less than a dollar today, because of:

A dollar received tomorrow can be worth less than a dollar today, because of:

Answer: the time value of money.

It is profitable for a farmer to borrow money to expand his farm business when the borrowed money:

It is profitable for a farmer to borrow money to expand his farm business when the borrowed money:

Answer: returns more than the cost.

The return an input would have earned in its best alternative use is called its:

The return an input would have earned in its best alternative use is called its:

Answer: opportunity cost.

Corn yields 90 bushels per acre and has a production cost of $140 per acre. Current market prices are $2.50 per bushel for corn and $6.00 per bushel for soybeans. Soybeans can be raised at a production cost of $110 per acre. At what breakeven yield per acre would soybeans generate the same net return per acre as corn?

Corn yields 90 bushels per acre and has a production cost of $140 per acre. Current market prices are $2.50 per bushel for corn and $6.00 per bushel for soybeans. Soybeans can be raised at a production cost of $110 per acre. At what breakeven yield per acre would soybeans generate the same net return per acre as corn?

Answer: 32 ½ bushels

Purchase of a call option on corn means:

Purchase of a call option on corn means:

Answer: The buyer may, but is not required to buy a corn futures contract at a set price.

When a farmer increases his investment in land, buildings, and equipment without increasing the total units of production, the cost per unit of production:

When a farmer increases his investment in land, buildings, and equipment without increasing the total units of production, the cost per unit of production:

Answer: increases

At the beginning of last year, you had an outstanding loan for $90,000. The loan carries an interest rate of 12% annual percentage rate. You make one loan payment at the end of the year for $25,400. What is the outstanding balance at the beginning of this year?

At the beginning of last year, you had an outstanding loan for $90,000. The loan carries an interest rate of 12% annual percentage rate. You make one loan payment at the end of the year for $25,400. What is the outstanding balance at the beginning of this year?

Answer: $55,000

Forward contracting provides the farmer with:

Forward contracting provides the farmer with:

Answer: less price uncertainty

In a free market, the role of price is to serve as a guide:

In a free market, the role of price is to serve as a guide:

Answer: in the decision of what, when, and the quantity to produce

Producers can diversify or specialize in their production. When producers diversify they are trying to manage some of their risk. When specializing they are:

Producers can diversify or specialize in their production. When producers diversify they are trying to manage some of their risk. When specializing they are:

Answer: increasing efficiencies in the enterprise.

The major advantage of renting or leasing over purchasing land or machinery is to:

The major advantage of renting or leasing over purchasing land or machinery is to:

Answer: release capital for other uses.

A stated advantage of sole proprietorship compared to a corporation is:

A stated advantage of sole proprietorship compared to a corporation is:

Answer: fewer legal constraints

Which of the following should be listed in the account book as the purchase of a capital asset?

Which of the following should be listed in the account book as the purchase of a capital asset?

Answer: herd sire.

Net worth is a measure of:

Net worth is a measure of:

Answer: financial position.

A business is "solvent" if total:

A business is "solvent" if total:

Answer: assets exceed the total liabilities.

The difference between net worth and total assets is:

The difference between net worth and total assets is:

Answer: total liabilities.

Liquidity is best described as:

Liquidity is best described as:

Answer: the ability to meet cash obligations as they come due.

A cost of production which does not vary with level of total production and includes items as depreciation, taxes, insurance, interest on investments is called:

A cost of production which does not vary with level of total production and includes items as depreciation, taxes, insurance, interest on investments is called:

Answer: a fixed cost

The most important reason for a complete farm record keeping system should be:

The most important reason for a complete farm record keeping system should be:

Answer: to provide information for farm management decision-making.

The funds available to purchase inputs and inventory items after the sales of current farm assets and payment of all current farm liabilities is known as:

The funds available to purchase inputs and inventory items after the sales of current farm assets and payment of all current farm liabilities is known as:

Answer: working capital.

A farmer has total assets of $500,000 of which land is $300,000. The farmer's debt : equity ratio is 1.0. What will the farmer's debt : equity ratio be if the lender devalues the land by 30%?

A farmer has total assets of $500,000 of which land is $300,000. The farmer's debt : equity ratio is 1.0. What will the farmer's debt : equity ratio be if the lender devalues the land by 30%?

Answer: 1.56

The nearby hog futures contract closed at $49.80 with a local basis of $1.85. The local cash market was:

The nearby hog futures contract closed at $49.80 with a local basis of $1.85. The local cash market was:

Answer: $47.95

There is a significant difference between which of these terms:

There is a significant difference between which of these terms:

Answer: Hedging - speculating.

If the government were to set the price of milk at an artificially high price, what is likely to occur.

If the government were to set the price of milk at an artificially high price, what is likely to occur.

Answer: A surplus.

If we want to consider the time value of money in considering alternative farm investments, we should choose the investment with:

If we want to consider the time value of money in considering alternative farm investments, we should choose the investment with:

Answer: The highest net present value.

If wheat and corn are common substitutes as an input into livestock feed, then an increase in the market price for corn is expected to:

If wheat and corn are common substitutes as an input into livestock feed, then an increase in the market price for corn is expected to:

Answer: Increase the demand for wheat

If demand and supply increased equally for an agricultural product, the results would be:

If demand and supply increased equally for an agricultural product, the results would be:

Answer: An increased quantity will be sold at the same price.

In preparing a cash flow plan, one should not include which expense items:

In preparing a cash flow plan, one should not include which expense items:

Answer: Machinery depreciation

The difference between a cash price at a particular location and a specified futures contract price is called

The difference between a cash price at a particular location and a specified futures contract price is called

Answer: basis

The present value of $100 that will be received at the end of 1 year, given a 5% interest (discount) rate is:

The present value of $100 that will be received at the end of 1 year, given a 5% interest (discount) rate is:

Answer: $95

The main difference between cash and accrual accounting is that accrual accounting includes

The main difference between cash and accrual accounting is that accrual accounting includes

Answer: adjustments for changes in inventory.

An increase in the value of the U.S. dollar relative to the currency of other countries should result in:

An increase in the value of the U.S. dollar relative to the currency of other countries should result in:

Answer: less costly imports to the U.S

The elasticity of supply measures the response of a change in price on:

The elasticity of supply measures the response of a change in price on:

Answer: production

The projected cash flow is useful in estimating:

The projected cash flow is useful in estimating:

Answer: credit needs

Renting farm land on shares of production rather than cash results in:

Renting farm land on shares of production rather than cash results in:

Answer: more risk for the landlord, less risk for the tenant.