Arkansas Agricultural Education & FFA



2015 Arkansas State Farm Business Management TestPart A. Economic Principles Related to Business ManagementExhibit 1(1)(2)(3)(4)VariableInputFixedInputQuantityof OutputMPP ofVariable Input0101120A2141B3163C4186D51108E61129F1. Refer to Exhibit 1. The numbers that go in blanks A and B are, respectively,a.20 and 22.b.0 and 21.c.20 and 61.d.20 and 21.2. Refer to Exhibit 1. The numbers that go in blanks C and F are, respectively,a.22 and 21.b.20 and 22.c.23 and 24.d.22 and 20.3. At a price of $15, Marta buys 3 CD's per month. When the price increases to $20, Marta buys 2 CD's per month. Luz says that Marta's demand for CD's has decreased. Is Luz correct?a.Yes, Luz is correct.b.No, Luz is incorrect. Marta's demand has increased.c.No, Luz is incorrect. Marta's quantity demanded has decreased, but her demand has stayed the same.d.No, Luz is incorrect. Marta's quantity demanded has increased, but her demand has stayed the same.4. Oil producers expect that oil prices next year will be lower than oil prices this year. As a result, oil producers are most likely toa.place more oil on the market this year, thus shifting the present supply curve of oil rightward.b.hold some oil off the market this year, thus shifting the present supply curve of oil leftward.c.place more oil on the market this year, thus increasing the quantity supplied of oil at lower but not higher prices.d.hold some oil off the market this year, thus decreasing the quantity supplied of oil at lower but not higher prices.5. If the price of gold is higher in New York than in London, people will want to ________ gold in London and _______ it in New York, thus _________ the price in London and _________ the price in New York.a.buy; sell; raising; loweringb.sell; buy; raising; loweringc.buy; sell; lowering; raisingd.sell; buy; lowering; raising6. Which of the following is true about the relationship between price and quantity supplied?a.There is always a direct relationship.b.There is always an inverse relationship.c.There is usually a direct relationship.d.There is usually an inverse relationship.7. When economists speak of scarcity, they are referring to thea.condition in which society is not employing all its resources in an efficient way.b.condition in which people's wants outstrip the limited resources available to satisfy those wants.c.economic condition that exists in only very poor countries of the world.d.condition in which society produces too many frivolous goods and not enough socially desirable goods.8. "Entrepreneurship" isa.the talent for organizing the use of land, labor and capital, among other things.b.skill in influencing government regulators and legislators.c.accumulated technical knowledge in using labor and capital.d.knowledge of the particular natural resources to be found in a given area.9. Some years ago, chemists at 3M Corporation were trying to create a super-strong glue. Somehow they got their molecules twisted and came up with one of the weakest glues ever made. But, rather than pouring it down the drain, they tried coating some paper with it. Voila! The "Post-It Note" was born. In this case, 3M was acting asa.a utility.b.a rationer.c.an entrepreneur.d.an abstraction.10. Which of the following statements is false?a.Money must change hands before a cost can be incurred.b.No monetary payment takes place when an implicit cost is incurred.c.Costs may be either explicit costs or implicit costs.d.Cost implies that a sacrifice has been made.11. A cost of resources used in production for which no actual monetary payment is made is a(n) __________ cost.a.tacitb.implicitc.covertd.explicit12. Five months ago Wilson opened up a health club. Which of the following is an implicit cost related to the health club?a.Wilson paid $120 for an outside laundry service to clean the towels used at the club.b.Wilson paid $100 for the pest control exterminator to spray the health club.c.Wilson previously worked as an accountant, earning $3,000 a month.d.Wilson usually eats four hamburgers a day, priced at $3 each.13. If a firm earns normal profit, then it has generated revenuesa.equal to the sum of implicit and explicit costs.b.greater than total opportunity costs.c.sufficient to cover explicit costs, but not implicit costs.d.sufficient to cover implicit costs, but not explicit costs.14. An unrecoverable cost that should be disregarded in any current or future decision is also called a(n) __________ cost.a.sunkb.explicitc.implicitd.variable15. Which of the following statements is true?a.The short run is always somewhere between six and twelve months.b.In the short run, changes in output can only be brought about by a change in the quantity of variable inputs.c.The long run is any period of time over one year.d.In the short run, there are variable costs but no fixed costs.16. Suppose that a firm produces hard candies using both machines and labor, and that its quantity of machines is currently fixed but it can vary the number of workers. As more workers are added to operate the machines, output increases. Is this a refutation of the law of diminishing marginal returns?a.Yes, because the law definitely states that output will decrease as more workers are added.b.No, because we must be observing output in the long run if the stated scenario is occurring.c.Yes, because the only way that this could occur is if the number of machines being used is also increasing.d.No, because it is entirely possible for output to increase even when the law is in operation.17. At 200 units of output, total cost is $36,000 and total variable cost is $20,000. What does total fixed cost equal at 200 units?a.$38,000b.$20,000c.$16,000d.$8018. Which of these statements is false?a.There are no fixed costs in the long run.b.Total costs are equal to total fixed costs plus total variable costs.c.In the short run, all inputs are fixed inputs.d.A fixed cost is a cost that does not change as output changes.19. The average-marginal rule states that if the marginal magnitude isa.less than the average magnitude, the average magnitude falls.b.greater than the average magnitude, the average magnitude falls.c.rising, the average magnitude is necessarily above it.d.falling, the average magnitude is necessarily below it.20. Suppose that one fixed and one variable input are used to produce good X. As the marginal physical product of the variable input increases, then marginal costa.increases.b.decreases.c.remains constant.d.There is not enough information to answer the question.21. If Max's demand for hot dogs falls as his income rises, then hot dogs area.a bad good.b.an inferior good.c.a preferential good.d.a normal good.22. An increase in the number of buyers in an area will result in aa.movement up the demand curve.b.movement down the demand curve.c.leftward shift in the demand curve.d.rightward shift in the demand curve.23. Tobacco production is one of the more heavily subsidized industries in the United States. Suppose that as a result of intense lobbying from health-related concerns, Congress repeals the tobacco firms' subsidies. Which of the following scenarios would likely occur?a.The tobacco firms' supply curve would shift rightward, as it would now be cheaper to produce each level of output.b.The tobacco firms' supply curve would shift leftward, since it would now cost more to produce each level of output.c.The tobacco firms would not experience any shift in their supply curves; subsidies don't affect output.d.There would be a movement along the supply curve for tobacco, but the supply curve would not shift.24. At college X, students pay less than the equilibrium tuition. At college Y, students also pay less than the equilibrium tuition. If the supply is the same at each college, it follows that the shortage will be greater ata.college X than college Y.b.college X than the surplus at college Y.c.college Y than the surplus at college X.d.college X than college Y if the demand is greater at college X.25. At a price above equilibrium price, there isa.a shortage.b.a surplus.c.excess demand.d.super-equilibrium.Exhibit 226. Refer to Exhibit 2. Suppose the government imposes a price ceiling at P = $0. There will bea.a shortage of kidneys equal to (Q3 - Q1).b.a surplus of kidneys equal to (Q3 - Q1).c.a shortage of kidneys equal to (Q2 - Q1).d.a shortage of kidneys equal to (Q2 - Q1).27. Refer to Exhibit 2. If a free market were allowed in the kidney market the equilibrium price would be P2. The number of kidneys transplanted would increase by _________ compared to the number transplanted at P= $0.a.(Q3 - Q1).b.(Q3 - Q2).c.(Q2 - Q1).d.Q2.28. If quantity demanded rises by 90 percent as price falls by 40 percent, the coefficient of price elasticity of demand equalsa.0.44.b.2.25c.1.0.d.50.0.29. Price rises from $10 to $15, and the quantity demanded falls from 100 units to 90 units. What is the coefficient of the price elasticity of demand between these two prices?a.0.26b.0.48c.3.8d.1.0030. If the price of good X falls and the demand for good X is unit elastic, then the percentage rise in quantity demanded is __________ the percentage fall in price, and total revenue __________.a.greater than; risesb.less than; fallsc.equal to; remains constantd.greater than; falls31. If Cassandra bought 16 cotton blouses last year when her income was $40,000 and she buys 24 cotton blouses this year her when income is $35,000, then blouses area.an inferior good.b.a normal good.c.a substitute good.d.a complementary good.Exhibit 332. Refer to Exhibit 3. The demand curve D1 isa.inelastic.b.elastic.c.unit elastic.d.perfectly elastic.33. Refer to Exhibit 3. The demand curve D2 isa.inelastic.b.elastic.c.perfectly elastic.d.perfectly inelastic.34. Refer to Exhibit 3. The demand curve D3 isa.inelastic.b.elastic.c.unit elastic.d.varying in elasticity along its length.35. Real-world markets that approximate the four assumptions of the theory of perfect competition includea.some agricultural markets.b.the soft drink market.c.the stock market.d.a and c36. In the theory of perfect competition,a.sellers of the product are not influenced by other sellers and therefore have virtually complete control over the production and pricing of their product.b.buyers of the product may have a preference as to whom they purchase from based on brand loyalty.c.buyers and sellers of the product know everything that there is to know about the product.d.it can be quite expensive for a firm to enter this type of market, but once the firm is established, it will be a profitable venture.37. Assume that a decreasing-cost industry experiences an increase in demand. In the short run, this willa.lead to a price increase.b.lead to a price decrease.c.have no influence on price.d.a or b, depending on the marginal cost curve38. Which of the following is an assumption of the theory of monopoly?a.There are extremely high barriers to entry.b.There are many sellers.c.The product has a number of close substitutes.d.The product is of extremely high quality.39. A natural monopoly exists whena.a monopolist produces a product, the main component of which is a natural resource.b.economies of scale are so large that only one firm can survive and achieve low unit costs.c.a firm is the exclusive owner of a key resource necessary to produce the firm’s product.d.there are no close substitutes for a firm's product.Exhibit 440. Refer to Exhibit 4. The market for good X is initially in equilibrium at $5. The government then places a tax on the producers of good X-in effect, taxing them on each unit of good X they sell. As a result, the supply curvea.shifts (down and) rightward from S2 to S1.b.shifts (up and) leftward from S1 to S2.c.does not shift from S1.d.There is not enough information to answer the question.41. Refer to Exhibit 4. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. As a result, the equilibrium pricea.rises from $5.00 to $6.25.b.falls from $5.00 to $4.00.c.remains constant at $5.00.d.none of the above42. Refer to Exhibit 4. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. What is the per-unit tax equal to?a.$1.00b.$2.25c.$0.25d.$4.0043. In a monopolistically competitive industry,a.each firm in the industry produces a slightly differentiated product.b.there are barriers to entry.c.there are barriers to exit.d.there are few sellers.44. If a monopolistically competitive firm raises its price, thena.it should expect to lose all of its customers because there are many other sellers of the product.b.this is a trick question because the firm does not have the ability to change its price.c.it should expect to lose some, but not all, of its customers.d.it will be able to increase its profits.45. Which of the following is an assumption of the theory of oligopoly?a.There are barriers to entry.b.There are many sellers and many buyers.c.Firms produce and sell either homogeneous or differentiated products.d.a and c46. Concentration ratios are not perfect guides to industry concentration, because theya.do not take into account foreign competition and competition from substitute goods.b.take into account foreign competition and competition from substitute goods.c.do not take into account advertising expenditures.d.do not take into account tax payments.47. A monopolist can sell 15,000 units at a price of $100 per unit. Lowering price by $1 raises the quantity demanded by 500 units. What is the change in total revenue resulting from this price change?a.$34,500b.$12,500c.$65,500d.-$35,50048. If explicit costs equal $30,000, implicit costs equal $45,000, and accounting profit equals $23,000, it follows that total revenue equals __________ and economic profit equals __________.a.$75,000; $17,000b.$53,000; -$22,000c.$68,000; $25,000d.$22,000; -$68,000Part B. Concepts related to the use and analysis of records to manage resources49. A mission statement is:a. a list of important jobs the farm manager needs to accomplish in the near future.b. a comprehensive plan to reshape the farm business over the next decadec. a set of goals to be achieved by a specific dated. a short summary of why a business exists 50. A fiscal accounting period is one whicha. covers January 1 through December 31b. is only 3 months in lengthc. ends on any date other than December 31d. can only be used by governmental agencies51. When using cash accounting which of the following accounts would never be used?a. grain salesb. depreciationc. fertilizer purchasesd. accounts payable52. Which of the following would not be recorded when using a single-entry, cash accounting system?a. charging $2,000 worth of chemicals at the farm supply storeb. billing a neighbor $850 for baling hayc. recognizing that $3,476.34 of interest has accrued since the last interest paymentd. all of the above53. One advantage of a double-entry accrual accounting system over a single-entry cash system is a. it is easier to enter transactionsb. a current balance sheet is always availablec. noncash transactions do not need to be enteredd. it can be done on a computer54. At the end of the year a farmer has an unpaid bill at the local machinery repair shop. It would be shown in an accrual accounting system as a(n)a. prepaid expenseb. account receivablec. account payabled. accrued expense55. A major advantage of accrual accounting over cash accounting isa. a more accurate estimate of annual profitb. simplicityc. always shows a higher profitd. can use single entry instead of double entry56. Using double entry accounting, transactions can be posted to which accountsa. only income and expenseb. only assets and liabilitiesc. income, expense, asset, and/or liabilities d. only cash and noncash57. An organized list of all accounts used by an accounting system is calleda. a chart of accountsb. a balance sheetc. an income statementd. a debit 58. According to the cash accounting method, expenses are recordeda. when they are paidb. when they are accruedc. at the end of each monthd. all of the above59. Of the following, which is the most liquid asset?a. farm machineryb. balance in checking accountc. breeding livestockd. feeder livestock60. If a business has working capital greater than $0, its current ratio will bea. greater than oneb. equal to onec. less than oned. there is no relationship between the amount of working capital and the current ratio61. If the debt/asset ratio is increasing, then the debt/equity ratio will bea. increasingb. decreasingc. constantd. indeterminate, need more information62. Which function of management is concerned with monitoring the results of a decision and taking corrective action?a. planningb. implementationc. controld. organization63. A short summary of why a particular business is in operation is called:a. internal scanningb. external scanningc. a mission statementd. whole farm plan64. Which of the following is an example of a strategic decision?a. determining fertilizer levels for cropsb. deciding when to sell grainc. determining what type of business/legal organization to used. setting milking times for a dairy65. Which of the following is an example of a tactical decision?a. balancing a livestock rationb. forming a partnership with a relativec. joining a feeder pig cooperatived. installing an irrigation system66. External scanning could include assessinga. the financial condition of the businessb. changes in consumer tastesc. the basic values of the managersd. productivity of the farmland owned67. One characteristic that makes decision making in agriculture different from other types of business isa. more government regulationb. prevalence of very large business unitsc. predictability of production processesd. fixed supply of a major resource such as land68. Which of the following best describes a balance sheet?a. it shows changes in assets and liabilities over the last accounting periodb. it shows changes in assets and liabilities over a period of timec. it shows assets and liabilities at a point in timed. it shows profit for the last accounting period69. The best description of a business which has increased its debt/asset ratio is one which hasa. purchased more assetsb. sold some assetsc. increased its debtd. increased its debt relative to total assets70. Which of the following assets would have the same value using either a cost or a market basis valuation?a. landb. machineryc. prepaid expensesd. purchased breeding livestock71. The degree to which a farm's assets adequately cover or exceed it liabilities is referred to asa. solvencyb. profitabilityc. liquidityd. working capital72. A statement of owner equity showsa. a list of all assets and liabilitiesb. the valuation adjustment for owner equityc. owner equity for the past 20 yearsd. the sources and amounts of changes in owner equity 73. Which financial statement covers only a single point in time rather than a period of time?a. income statementb. statement of owner equityc. statement of cash flowsd. balance sheet 74. A lender would usually prefer to have farm assets valued at their ________ value on a balance sheet that is part of a loan application.a. cashb. accrualc. costd. market75. The “cost value” shown on a balance sheet for an asset such as a tractor is equal toa. the original purchase priceb. the original purchase price less depreciation expense take to date c. the original purchase price plus cost all repairs to dated. the cost of a new tractor of the same size76. An advantage of using the value of working capital instead of a cash flow budget to analyze a farm's liquidity:a. it is simpler to calculate b. it takes into account the timing of the cash flowsc. it takes into account revenue to be received from the sale of products not yet in existenced. it takes into account future operating expenses as well as debt repayment 77. When the value of livestock production per $100 feed fed is greater than 100 it means that:a. the livestock enterprise had a positive profitb. the livestock enterprise had a negative profitc. feed costs were less than gross revenue adjusted for inventory changes, home consumption and livestock purchasesd. $100 per hundredweight was the breakeven sale price78. Which of the following ratios does not analyze the solvency of the farm business?a. debt/asset ratiob. turnover ratioc. debt/equity ratiod. equity/asset ratio79. Which of the following is a measure of economic efficiency?a. net farm incomeb. gross revenue per year of laborc. change in owner equityd. net cash flow80. A “contingent” or “deferred” income tax liability is one thata. is owed but not yet paidb. would be owed if and when an asset is soldc. represents delinquent taxes from past yearsd. would be due under cash accounting but not accrual accounting81. The “cost” value of farmland can change due toa. changes in the selling price of farmland b. accumulated depreciationc. the cost of nondepreciable improvements made, such as terraces and earthen damsd. increases in property taxes82. Paying a seed dealer a sum of money in December to be applied toward seed to be delivered in the spring would show up on a balance sheet as:a. a prepaid expenseb. an account receivablec. an account payabled. supplies on inventory83. The depreciation method with the greatest depreciation in the first year isa. double declining balanceb. 150% declining balancec. straight lined. all of the above have the same depreciation in the first year84. Which of the following cannot be valued using the cost less accumulated depreciation method?a. tractorb. barnc. purchased dairy cowd. land85. The total depreciation over an asset’s useful life is equal toa. cost minus salvage valueb. cost plus salvage valuec. book valued. salvage value86. A depreciable asset’s book value will equal its salvage valuea. only on the purchase dateb. only at the midpoint of its useful lifec. only at the end of its useful lifed. every year of its useful life87. Which of the following items on a balance sheet would not be considered when making accrual adjustments to net income?a. accrued interestb. change in market value of landc. inventories of market livestockd. pre-paid expenses88. Which of the following is not included as an expense on the net farm income statement?a. depreciationb. interest payments made on loansc. principal payments made on loansd. the cost of supplies used but not yet paid for89. Which type of financial statement would be most useful for keeping record of expenses? a. Net worth statementb. Net income statementc. Statement of owner equityd. Statement of cash flows90. Two similar farms could have the same return to management but different net farm income due to: a. differences in prices received for products soldb. differences in prices paid for inputs purchasedc. differences in amount of unpaid labor and equity capital contributedd. differences in physical efficiency 91. In general terms, efficiency refers to: a. the volume of resources utilized in the farm businessb. the ratio of total liabilities to total assets in the businessc. the net farm income generated by the farm businessd. the volume of production generated per unit of resource utilized in the farm business92. A trend analysis for a farm business could be performed using what kind of data for comparison?a. historical data from the same farm for the past five yearsb. data from comparable farms in the same region for the same year c. expected results from a whole farm budget completed at the beginning of the year d. historical data from similar farms in the same region for the past five years 93. Low profitability can be caused by:a. low yields or output levels relative to input useb. unused machinery capacity with high levels of machinery ownership cost relative to output c. poor marketing leading to low prices receivedd. all of the above can cause low profitability94. Which of the following farm business analysis measures is not a measure of efficiency (either physical or economic)?a. gross revenue generated per person (FTE)b. pounds of milk produced per cow per yearc. value of crops produced per acred. dollars received per ton of hay sold95. A farm’s asset turnover ratio measures:a. how often they replace machinery and equipmentb. how much gross revenue is generated for each dollar invested in farm assetsc. how many years it takes to pay for machinery and buildingsd. how much debt the farm has for each dollar of assets96. A ranch that just replaced a large number of fences and corrals would most likely see which of the following ratios increase?a. depreciation expense ratiob. interest expense ratioc. operating expense ratiod. net farm income from operations ratio97. When preparing a cash flow budget it is important to a. take into account the expected timing of cash inflows and outflowsb. include all noncash expensesc. include only noncash revenues d. estimate expected cash inflows and outflows for a whole year only98. A projected negative annual cash flow indicatesa. net farm income will be negativeb. depreciation expense is too highc. projected cash inflows are less than projected cash outflowsd. projected asset values are less than projected liability values99. A cash flow budget can be used to monitor the farm business bya. comparing actual cash inflows and outflows to the budgeted monthly cash flowsb. comparing actual cash inflows and outflows to 10-year averagesc. comparing the projected ending cash balances to the actual balances for each monthd. comparing actual selling prices to those assumed in the cash flow budget100. A cash flow analysis of an investment in a new capital asset should include projections fora. several monthsb. one year on a monthly basisc. one year for the whole year onlyd. several years101. The last step in constructing a cash flow budget should bea. estimating the amount of crop and livestock production for the yearb. estimating how much new current debt will be needed and can be repaid each monthc. estimating family living expensesd. estimating when payments on existing debt are due102. A cash flow budget should contain all of the following items excepta. depreciationb. principal payments on machinery loansc. cost of new farm machinery to be purchasedd. diesel fuel103. The size of the minimum cash balance a farm business should try to show at the end of each budgeting period will depend ona. the total dollars of cash inflows and outflows projectedb. the form of farm business organization the farm choosesc. the number of acres farmedd. the number of people employed on the farm104. Estimating the total amount of operating credit that will be owed at the end of each time period during the year is useful fora. projecting farm’s net worth at the end of the yearb. comparing to the maximum balance on an operating line that a lender will approvec. scheduling crop and livestock marketingd. estimating the farm’s net income for the yearPart C. Concepts and functions of risk management105. Suppose that a tariff is imposed on imported cheese. This will have the effect of __________ the price of cheese, __________ consumers' surplus, and __________ producers' surplus.a.increasing; increasing; increasingb.decreasing; decreasing; decreasingc.increasing; increasing; decreasingd.increasing; decreasing; increasing106. If an acre of alfalfa requires $75 of operating capital and 5 hours of labor, and a farm has 70 acres of land, 400 hours of labor, and $4,500 of operating capital available, the maximum acres of alfalfa that can be grown is: a. 50b. 60c. 70d. 80107. Which of the following are the profit increasing changes on a partial budget?a. additional costs and additional revenueb. reduced costs and reduced revenuec. reduced costs and additional revenued. additional costs and reduced revenueExhibit 5BondFaceValueof BondPrice ofthe BondAnnualPaymentA$1,000$800$60B$1,000$900$150C$1,000$1,000$250D$1,000$1,100$400E$1,000$1,200$450108. Refer to Exhibit 5. The coupon rate for bond A isa.6.0 percent.b.0.06 percent.c.7.5 percent.d.0.075 percent.109. Refer to Exhibit 5. The yield on bond A isa.6.0 percent.b.0.06 percent.c.7.5 percent.d.0.075 percent.110. Refer to Exhibit 5. The yield on bond B isa.0.17 percent.b.16.7 percent.c.0.15 percent.d.15 percent.111. Refer to Exhibit 5. The yield on bond C isa.0.25 percent.b.25 percent.c.2.5 percent.d.100 percent.112. Which of the following are the profit decreasing changes on a partial budget?a. additional costs and additional revenueb. additional costs and reduced revenuec. reduced costs and additional revenued. reduced costs and reduced revenue113. If a partial budget shows some fixed or ownership costs under Reduced Costs, it meansa. the proposed alternative requires purchasing a new capital assetb. a new capital asset must be purchased next year with either alternativec. the proposed alternative would allow sale of a capital asset that will no longer be neededd. there is an error on the budget as fixed costs are never included under Reduced Costs114.Suppose that a tariff is imposed on imported cheese. This will have the effect of __________ the quantity consumed of cheese, __________ consumers' surplus, and __________ the government's tariff revenues.a.increasing; increasing; increasingb.decreasing; decreasing; increasingc.increasing; decreasing; decreasingd.decreasing; increasing; increasing115. On a partial budget which analyzes switching 120 acres from growing wheat to growing barley, which of the following costs would not be included on the budget?a. seed expense for either cropb. fertilizer for the barleyc. fertilizer for the wheatd. property tax on the land116. On a partial budget analyzing a change from cow-calf production to stocker-production, using the same pasture acreage and facilities, which of the following would be included as a reduced cost?a. cull cow salesb. feeder cattle purchasesc. a fixed interest charge for ownership of breeding livestockd. pasture rent 117. A partial budget includes only revenue and costs that would _____________ as a result of a change in a certain management practice.a. increaseb. decreasec. increase or decreased. not change118. Which of the following is not a source of owner equity for a farm business?a. loans received to purchase landb. increases in the value of owned landc. profit retained in the businessd. assets contributed to the business by the owner(s)119. Using $20,000 in cash and a new loan of $80,000 to purchase land for $100,000 will cause equity toa. increase by $100,000b. increase by $20,000c. increase by $80,000d. not change120. If $50,000 cash on hand is used to pay a $50,000 operating loan then on the day of the transaction:a. net worth will not change but the current ratio will changeb. neither net worth nor the current ratio will changec. net worth will increase but the current ratio will not changed. net worth will increase and the current ratio will change 121. In a joint operating agreement, gross income is shared in proportion to each person's contribution to:a. total laborb. total costsc. total assetsd. total liabilities122. A parent and child who were starting to farm together would most likely double the size of their cow herd and milking parlor if their ultimate goal was to end up with:a. a "spin-off" operation with the child farming separately from the parentsb. the parents retiring in a few years and renting the farm to the childc. a family farming corporation with both parent and child actively involvedd. the child working full-time off the farm123. Estate planning is most concerned with passing on the _____ of the farm to the next generation.a. incomeb. ownershipc. management d. debt124. A "limited" partnership is one in which:a. some partners do not participate in management, and have limited liabilityb. the maximum number of acres farmed is fixed by lawc. the number of partners must not exceed 75d. only one type of enterprise is carried out125. A limited liability company combines the legal aspects of:a. a sole proprietorship and a partnershipb. a partnership and a corporationc. a corporation and a cooperatived. a sole proprietorship and a corporation126. In a farm partnership, net income is shared in proportion to:a. the labor contributed by each partnerb. the total costs paid by each partnerc. the ownership shares of each partnerd. the number of partners127. In a cooperative, shareholders have voting rights:a. in proportion to the number of shares ownedb. in proportion to the amount of business done with the cooperativec. in proportion to the capital contributedd. that are equal for all members Exhibit 6May 12, 2004November 5, 2004November 2004 Soybean Future Contract Price (one contract is 5,000 bushels)$6.23/bushel$7.50/bushelSoybean Spot Price$7.15$7.35128. Refer to Exhibit 6. On November 5, 2004, what was the soybean basis?a. -1.5b. -0.15c. 1.5d. 0.15 129. Refer to Exhibit 6. On May 12, a speculator sells three November soybean futures contracts and off-sets those contracts on November 5. What are speculator’s profits?a. -$190.50b. -$19,050c. $190.50d. $19,050130. Refer to Exhibit 6. Soybean farmers plant in May and harvest in November. A soybean farmer hedges by __________ November soybean futures in May, _____________ the same number of November soybean futures in November and selling their grain in the spot market.a. buying, buyingb. buying, sellingc. selling, buyingd. selling, selling131. Refer to Exhibit 6. If the soybean farmer hedged in 2004, what hedge price did she receive? a. $608.00b. $0.608c. $60.80d. $6.08132. The most common form of farm business organization is thea. sole proprietorshipb. partnershipc. limited liability companyd. corporation.133. A corporate bond specifies all of the following excepta.maturity date.b.face value.c.equity.d.coupon rate.134. A tariff is a tax ona.savings.b.capital goods.c.imports.d.land.135. Beth purchased two May live-cattle futures contracts in January. One contract is 40,000 lbs. of live-cattle. It is currently March. In March, Beth can fulfill her contract obligation by a.purchasing two May live-cattle futures contractsb.selling two May live-cattle futures contractsc.delivering 80,000 lbs. of live-cattle to a futures transaction pointd.accepting delivery of 80,000 lbs. of live-cattle at a futures transaction pointExhibit 7DateJuly 2004 Winter WheatContract Futures Price (5,000 bushels/contract)Spot Price in YourTownSettlement Price ($ per bushel)($ per bushel)January 10, 20043.303.60July 10, 20043.503.45136. Refer to Exhibit7. You are a wheat farmer who plans to harvest and sell wheat in July. You decide to hedge all of your wheat by selling wheat futures contracts on January 10, 2004. You expect the basis in July to be -$0.10. What is your expected hedge price on January 10?a. $32.00b. $3.20c. $320.00d. $2.30137. Refer to Exhibit 7. You are a wheat farmer who plans to harvest and sell wheat in July. You decide to hedge all of your wheat by selling wheat futures contracts on January 10, 2004. You expect the basis in July to be -$0.10. Come July 10, you offset your future position and sell in your local spot market. What is our realized hedge price?a. $3.25b. $2.35c. $32.50d. $23.50138. Refer to Exhibit 7. You purchase a put option for a July 2004 winter wheat futures contract at a price (the option premium) of $0.40 per bushel. The strike price or this option is $4.00 per bushel. If the expected basis in July is $0.25/bushel, what is the minimum expected price you will receive for your wheat by using this option?a. $38.50b. $83.50c. $3.85d. $8.35Exhibit 8OpenHighLowSettleChg. CATTLE (CME)40,000 lbs. – cents per lb.Aug. 0580.0080.2279.7579.92+.12Oct. 0581.0581.3080.5780.65- .07Dec. 0583.8084.1583.5083.62- .12Feb. 0686.0086.3585.8585.97- .20Apr. 0684.5084.7584.1584.42- .12Jun. 0680.2080.3579.6079.60- .30Aug. 0679.5279.5279.5279.52- .27Est. sales 11, 282. Mon’s sales 15, 866Mon’s open int. 131, 490. +309139. Refer to Exhibit 8. On August 10, 2005, what was the best prediction of live-cattle spot prices in February 2006?a. 85.97 cents per lb.b. 8.597 cents per lb.c. 1.59 cents per lb.d. 0.8597 cents per lb. 140. Refer to Exhibit 8. On August 10, 2005, a buyer of live-cattle decides to execute a hedge for cattle her will purchase in April 2006. In April, he expects the basis to be $2.25/cwt. If he hedges today, about what hedge price does he expect to receive?a. 0.8667/ cwtb. 8.667/ cwtc. 86.67/ cwtd. 866.7/ cwt141. Markets that quickly and accurately assimilate all available information into market prices are referred to as __________ markets.a. efficientb. inefficientc. monopolyd. elasticExhibit 9ContractFuture Prices onFebruary 6, 2003Future Prices onMarch 1, 2003Settlement Price($ per bushel)Settlement Price($ per bushel)March 03 Corn FuturesContract (5,000 bushels)2.382.50February 04 Corn FuturesContract (5,000 bushels)2.442.62142. Refer to Exhibit 9. Suppose Dave Chappell bought two March corn contracts on February 6, 2003. It is currently March 1, 2003, the month in which the March contract expires. He can fulfill his contract obligation by a.selling two March corn contracts at $2.38/bushelb.buying two March corn contracts at $2.50/bushelc.accepting delivery of corn and paying $2.38/busheld.accepting delivery of corn and paying $2.50/bushel143. More than 99% of all futures contract obligation are met bya.offsettingb.accepting or making deliveryc.canceling the contractExhibit 10Futures ContractFutures Prices onFebruary 6, 2003Futures Prices onMarch 1, 2003Settlement Price($ per bushel)Settlement Price($ per bushel)March Corn (5, 000 bushels)2.382.50December Corn (5,000bushels)2.442.62July Wheat (5,000 bushels)3.413.10144. Refer to Exhibit 10. Suppose it is March 1, 2003. Between March and December, the spot price of corn is expected to a.riseb.fallc.remain the samed.cannot tell from the information given145. Refer to Exhibit 10. Suppose it is February 6, 2003. The best prediction of corn spot prices in March is ____________.a. $23.80/bushelb. $2.38/bushelc. $32.80/busheld. $3.28/ bushel146. Refer to Exhibit 10. If Pistol Pete purchases one July wheat contract on February 6 and offsets the contract on March 1, how much total money will he receive or pay?a. $15.50b. $1,550c. -$15.50d. -$1,550 147. A "quota" isa.a tax imposed on imported goods.b.a legal limit on the amount of a good that can be produced by foreign owners of a firm located in a host country.c.a legal limit on the amount of a good that can be imported.d.an agreement between two countries in which the exporting country voluntarily agrees to limit its exports to the importing country.Exhibit 11Country 1Country 2Good AGood BGood AGood B200075016020601512040453080603045408015600100075148. Refer to Exhibit 11. The opportunity cost of one unit of good B is __________ for country 1 and __________ for country 2.a.20A; 15Ab.2A; 1Ac.40A; 15Ad.1/2A; 1A149. Refer to Exhibit 11. The opportunity cost of one unit of good A is __________ for country 1 and __________ for country 2.a.20B; 15Bb.2B; 1Bc.40B; 15Bd.1/2B; 1B150. Refer to Exhibit 11. Country 1 has a comparative advantage in the production of __________, and country 2 has a comparative advantage in the production of __________.a.good A; good Bb.good B; good Ac.both goods; neither goodd.neither good; both goods2015 Arkansas State Farm Business Management TestDACAACBACABCAABDCCABBDBDBACBACADDDDCAABBABACDAABDCDDBCACAABAACCCABDCDCADDDBABBBBCAADACBCBCDADDBAACADBAABDBCACBBBCBDCCADABCBABCDBBCDACCBBACACACAABDCBDA ................
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