Name: 
 

2003 North Carolina State Farm Business Management Test



Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

 1. 

Which of the following statements is true about diminishing returns?
a.
Diminishing returns are only found in the short run
b.
Diminishing returns are only found in the long run
c.
Diminishing returns set in after the point at which marginal product is greatest
d.
All of these are true
e.
Both (Diminishing returns are only found in the short run) and (Diminishing returns set in after the point at which marginal product is greatest) are true
 

 2. 

If a farm has a working capital greater than $0, its current ratio will be:
a.
Greater than one
b.
Equal to one
c.
Less than one
d.
There is no relationship between working capital and the current ratio
 

 3. 

Another name for the discounting method is:
a.
Future value
b.
Present value
c.
Income value
d.
Purchase value
 

 4. 

For IRS purposes, a farmer is one who has what percentage of income coming from agricultural or horticultural activities?
a.
33.333%
b.
50.00%
c.
66.67%
d.
75.00%
 

 5. 

In marginal analysis, the point of diminishing returns occurs:
a.
Where marginal revenue is less than marginal cost
b.
Where marginal revenue is more than marginal cost
c.
Where marginal revenue equals marginal cost
d.
There is no relationship between diminishing returns and marginal analysis
 

 6. 

By adding a feed mill to a dairy cattle operation, a producer becomes more
a.
Specialized
b.
Diversified
c.
Integrated
d.
Motivated
 

 7. 

Cooperatives differ from other corporations in which area?
a.
No board of directors in a coop
c.
No manager in a cooperative
b.
How voting is done
d.
Cooperatives are not incorporated
 

 8. 

When a farmer increases his investment in land, buildings and equip,equipment without increasing the total units of production, cost per unit:
a.
Increase
c.
Decreases
b.
Remains the same
d.
Varies with the operator
 

 9. 

Farmer Joe earned $30,000 from farming last year. His total assets are valued at $420,000. He has outstanding mortgages and loans of $175,000. What rate of return did he earn on his equity?
a.
7.14 %
b.
8.51 %
c.
12.24 %
d.
17.14 %
 

 10. 

For maximum net returns, a farmer should substitute machinery for labor when:
a.
There is a limited supply of labor.
b.
Value of labor saved is more than annual machine cost
c.
The annual cost of machine use is equal to the cost of labor
d.
The additional machine will increase labor efficiency
 

 11. 

On May 1, after surveying his corn records, a farmer has determined that his total variable cost per acre will be approximately $258. His fixed cost per acre is estimated at $70. Given a yield of 150 bushels per acre, what is his break-even price per bushel?
a.
$0.47
b.
$1.25
c.
$1.72
d.
$2.19
 

 12. 

What is the annual opportunity interest cost for a new feed grinder-mixer that costs $15,000 and has an expected salvage value of $3,000 after 8 years? The interest rate is 10%.
a.
$150
b.
$600
c.
$900
d.
$1,500
 

 13. 

In the short run,
a.
Total fixed costs are zero when there is no production
b.
Total variable costs are zero when there is no production
c.
Total cost will remain constant as output increased
d.
Total cost will decrease as output is increased
 

 14. 

On March 1, Jennifer borrowed $10,000 to plant soybeans. On November 1, she repaid the $10,000 along with $505 interest. What annual interest rate did she pay?
a.
5.050 %
b.
7.575 %
c.
8.657 %
d.
10.607 %
 

 15. 

The price at which consumers are willing to buy all that the producers are willing to supply to the market is called the:
a.
Production Methods
c.
Support Price
b.
Equilibrium Price
d.
Risk-Free Market Place
 

 16. 

A farmer and spouse file a joint tax return. The farmer does not make estimated tax payments and off-farm income is less then 1/3 of total gross income. When must the 2002 tax returns be filed with full payment of taxes due?
a.
January 31, 2003
c.
April 15, 2003
b.
March 1, 2003
d.
June 15, 2003
 

 17. 

The present value of $150 that will be received at the end of 1 year, given a 5% interest (discount) rate is:
a.
$95.24
b.
$142.86
c.
$155.00
d.
$157.50
 

 18. 

A grain combine can be purchased for $120,000. Total annual fixed costs will be $15,000 and variable costs per acre will be $15. If a custom operator can be hired to combine grain for $35 per acre, what is the minimum number of acres one should plan to harvest to justify buying the combine?
a.
750
b.
800
c.
1,000
d.
15,000
 

 19. 

The book value of a piece of farm equipment would be the
a.
Value that the item currently has on the open market
b.
Cost of an item plus the total depreciation to date
c.
Cost of the item minus depreciation
d.
Sentimental value of the item to the producer
 

 20. 

If the U.S. wheat industry has an inelastic demand curve, a reduction in the amount of wheat supplied to the market would:
a.
Have no effect on total revenues in the wheat industry
b.
Increase the total revenues in the wheat industry
c.
Decrease the total revenues in the wheat industry
d.
Cause a sharp increase in the demand for wheat
 

 21. 

A contract which gives the buyer the right, but not the obligation to assume a long (futures) position a specific price within a specified period of time is a:
a.
Strike price
b.
Call option
c.
Put option
d.
Option price
 

 22. 

The price at which the futures market contract underlying a call or put option can be purchased (if a call) or sold (if a put) is a:
a.
Strike price
b.
Call option
c.
Put option
d.
Option price
 

 23. 

In the bear market we would expect:
a.
Prices to fall
c.
Corporate mergers
b.
Prices to rise
d.
Large price fluctuation
 

 24. 

A “limited” partnership is one in which:
a.
Some partners do not participate in management, and have limited liability
b.
The maximum number of acres is fixed by state law
c.
The number of partners may not exceed 75
d.
Only one type of enterprise is carried out
 

 25. 

If the demand curve for a firm;s product is relatively inelastic, its total revenue can be increased by:
a.
Increasing price
c.
Increasing quantity supplied
b.
Decreasing price
d.
All of these are correct
 



 
Check Your Work     Reset Help