2015 Arkansas FFA District Farm Business Management Test

Part A. Economic Principles Related to Business Management

  1. When economists speak of scarcity, they are referring to the ______.
  2. Condition in which society is not employing all its resources in an efficient way
  3. Condition in which people’s wants outstrip the limited resources available to satisfy those wants
  4. Economic condition that exists in only very poor countries of the world
  5. Condition in which society produces too many frivolous goods and not enough socially desirable goods.
  6. Which of the following is NOT one of the categories of resources?
  7. Labor
  8. Government
  9. Capital
  10. Entrepreneurship
  11. “Entrepreneurship” is ______.
  12. the talent for organizing the use of land, labor and capital, among other things
  13. skill in influencing government regulators and legislators
  14. accumulated technical knowledge in using labor and capital
  15. knowledge of the particular natural resources to be found in a given area.
  16. 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. 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 as ______.
  17. A utility
  18. A rationer
  19. An entrepreneur
  20. An abstraction
  21. A cost that is incurred when an actual monetary payment is made is a(n) ______cost.
  22. Explicit
  23. Implicit
  24. Positive
  25. Expressed
  26. Which of the following is true?
  27. Economists calculate only economic profit, and accountants calculate only accounting profit.
  28. Economic profit is always greater than accounting profit.
  29. Accounting profit is the difference between total revenue and explicit costs.
  30. Economic profit is the difference between total revenue and implicit costs.
  31. Which of the following statements is false?
  32. Money must change hands before a cost can be incurred.
  33. No monetary payment takes place when an implicit cost is incurred.
  34. Costs may be either explicit costs or implicit costs.
  35. Costs implies that a sacrifice has been made.
  36. Economic profit is the difference between total revenue and ______.
  37. Explicit costs
  38. Implicit costs
  39. Sunk costs
  40. The sum of explicit and implicit costs
  41. A cost of resources used in production for which no actual monetary payment is made is a(n) ______cost.
  42. Tacit
  43. Implicit
  44. Covert
  45. Explicit
  46. Five months ago Wilson opened up a health club. Which of the following is an implicit cost related to the health club?
  47. Wilson paid $120 for an outside laundry service to clean the towels used at the club.
  48. Wilson paid $100 for the pest control exterminator to spray the health club.
  49. Wilson previously worked as an accountant, earning $3,000 a month.
  50. Wilson usually eats four hamburgers a day, priced at $3 each.
  51. If a firm earns a normal profit, then it has generated revenues ______.
  52. Equal to the sum of implicit and explicit costs
  53. Greater than total opportunity costs
  54. Sufficient to cover explicit costs, but not implicit costs
  55. Sufficient to cover implicit costs, but not explicit costs
  56. An unrecoverable cost that should be disregarded in any current or future decision is also called a(n) ______cost.
  57. Sunk
  58. Explicit
  59. Implicit
  60. Variable
  61. A fixed input is an input whose quantity ______.
  62. Can be changed as output changes in the short term
  63. Cannot be changed as output changes in the short run
  64. Cannot be changed as output changes in the long run
  65. Both (A) and (C)
  66. Which of the following statements is true?
  67. The short run is always somewhere between six and twelve months.
  68. In the short run, changes in output can only be brought about by a change in the quantity of variable inputs.
  69. The long run is any period of time over one year.
  70. In the short run, there are variable costs but no fixed costs.
  71. Average fixed cost ______.
  72. Is usually greater at lower levels of output than at higher levels
  73. Does not change as output changes
  74. Exists only in the short run
  75. Both (A) and (C)
  76. 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?
  77. $38,000
  78. $20,000
  79. $16,000
  80. $80
  81. Which of these statements is false?
  82. There are no fixed costs in the long run.
  83. Total costs are equal to total fixed costs plus total variable costs.
  84. In the short run, all inputs are fixed inputs.
  85. A fixed cost is a cost that does NOT change as output changes.
  86. Costs that do not change with output are called ______costs.
  87. Marginal
  88. Average
  89. Fixed
  90. Variable
  91. 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 cost ______.
  92. Increases
  93. Decreases
  94. Remains constant
  95. There is not enough information to answer the question

Exhibit 1

(1) Variable Input / (2) Fixed Input / (3) Quantity of Output / (4) MPP of Variable Input
0 / 1 / 0
1 / 1 / 20 / A
2 / 1 / 41 / B
3 / 1 / 63 / C
4 / 1 / 86 / D
5 / 1 / 108 / E
6 / 1 / 129 / F
  1. Refer to Exhibit 1. The numbers that go in blanks (A) and (B) are ______, respectively.
  2. 20 and 22
  3. 0 and 21
  4. 20 and 61
  5. 20 and 21
  6. Refer to Exhibit 1. The numbers that go in blanks (C) and (F) are ______, respectively.
  7. 22 and 21
  8. 20 and 22
  9. 23 and 24
  10. 22 and 20
  11. The law of demand states that price and quantity demanded are ______.
  12. Directly related, ceteris paribus
  13. Inversely related, ceteris paribus
  14. Independent
  15. Positively related, ceteris paribus
  16. 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?
  17. Yes, Luz is correct.
  18. No, Luz is incorrect. Marta’s demand has increased.
  19. No, Luz is incorrect. Marta’s quantity demanded has decreased, but her demand has stayed the same.
  20. No, Luz is incorrect. Marta’s quantity demanded has increased, but her demand has stayed the same.
  21. One major reason for the law of demand is that ______.
  22. One price changing requires at least one other price to change in the opposite direction
  23. People substitute relatively lower-priced goods for relatively higher-priced goods
  24. A higher price never reduced quantity demanded by enough to lower total revenue
  25. People are willing to produce more units at a higher price
  26. If an increase in income results in an increase in the demand for chicken, then chicken is ______.
  27. A neutral good
  28. A luxury good
  29. A normal good
  30. An inferior good
  31. The law of supply states that price and quantity supplied are ______.
  32. Inversely related, ceteris paribus
  33. Directly related, ceteris paribus
  34. Not realted
  35. Fixed
  36. Which of the following is true about the relationship between price and quantity supplied?
  37. There is always a direct relationship.
  38. There is always an inverse relationship.
  39. There is usually a direct relationship.
  40. There is usually an inverse relationship.
  41. If Max’s demand for hot dogs falls as his income rises, then hot dogs are ______.
  42. A bad good
  43. An inferior good
  44. A preferential good
  45. A normal good
  46. An increase in the number of buyers in an area will results in a ______.
  47. Movement up the demand curve
  48. Movement down the demand curve
  49. Leftward shift in the demand curve
  50. Rightward shift in the demand curve
  51. 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’s subsidies. Which of the following scenarios would likely occur?
  52. The tobacco firms’ supply curve would shift rightward, as it would now be cheaper to produce each level of output.
  53. The tobacco firms’ supply curve would shift leftward, since it would now cost more to produce each level of output.
  54. The tobacco firms would not experience any shift in their supply curves; subsidies don’t affect output.
  55. There would be a movement along the supply curve for tobacco, but the supply curve would not shift.
  56. Which of the following will NOT shift a supply curve?
  57. A change in the price of relevant resources.
  58. A change in the good’s own price.
  59. A change in the number of sellers.
  60. A change in per-unit costs brought about by a change in taxes.
  61. At a price above equilibrium price, there is ______.
  62. A shortage
  63. A surplus
  64. Excess demand
  65. Super-equilibrium
  66. On a supply-and-demand diagram, equilibrium is found ______.
  67. Where the supply curve intercepts the vertical axis
  68. Where the demand curve intercepts the horizontal axis
  69. Where the demand and supply curves intersect
  70. At every point on either curve

Exhibit 2

  1. Refer to Exhibit 2. Suppose the government imposes a price ceiling at P = $0. There will be ______.
  2. A shortage of kidneys equal to (Q3 – Q1)
  3. A surplus of kidneys equal to (Q3 – Q1)
  4. A shortage of kidneys equal to (Q2 – Q1)
  5. A surplus of kidneys equal to (Q2 – Q1)
  6. 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.
  7. (Q3 – Q1)
  8. (Q3 – Q2)
  9. (Q2 – Q1)
  10. Q2
  11. Price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in ______.
  12. Interest rates
  13. Price
  14. Supply
  15. Demand
  16. If quantity demanded rises by 90 percent as price falls by 40 percent, the coefficient of price elasticity of demand equals ______.
  17. 0.44
  18. 2.25
  19. 1.0
  20. 50.0
  21. 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?
  22. 0.26
  23. 0.48
  24. 3.8
  25. 1.00
  26. If the percentage change in quantity demanded is equal to the percentage change in price, demand is ______.
  27. Inelastic
  28. Unit elastic
  29. Elastic
  30. Perfectly elastic
  31. If quantity demanded is completely unresponsive to changes in price, demand is ______.
  32. Inelastic
  33. Elastic
  34. Perfectly elastic
  35. Perfectly inelastic
  36. 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 ______.
  37. Greater than; rises
  38. Less than; falls
  39. Equal to; remains constant
  40. Greater than; falls
  41. The fewer substitutes for a good, ______.
  42. The lower its income elasticity of demand
  43. The higher its income elasticity of demand
  44. The lower its price elasticity of demand
  45. The higher its price elasticity of demand
  46. If price rises and total revenue falls, ______.
  47. Cross elasticity is negative
  48. Price elasticity of demand is less than 1
  49. Income elasticity of demand is positive
  50. NONE of the above
  51. If Cassandra bought 16 cotton blouses last year when her income was $40,000 and she buys 24 cotton blouses this year when her income is $35,000, then blouses are ______.
  52. An inferior good
  53. A normal good
  54. A substitute good
  55. A complementary good
  56. A normal good is ______.
  57. Any good that consumers normally buy
  58. Any good for which other goods can substitute
  59. A good for which the demand rises as income falls
  60. A good for which the demand rises as income rises
  61. If the percentage change in quantity demanded of a good is less than the percentage change in income, then the good is said to be ______.
  62. Income elastic
  63. Income inelastic
  64. Income unit elastic
  65. Price elastic
  66. If the percentage change in quantity demanded of a good is equal to the percentage change in income, then the good is said to be ______.
  67. Income elastic
  68. Income inelastic
  69. Income unit elastic
  70. Price unit elastic

Exhibit 3

  1. Refer to Exhibit 3. The demand curve D1 is ______.
  2. Inelastic
  3. Elastic
  4. Unit elastic
  5. Perfectly elastic
  6. Refer to Exhibit 3. The demand curve D2 is ______.
  7. Inelastic
  8. Elastic
  9. Perfectly elastic
  10. Perfectly inelastic
  11. Refer to Exhibit 3. The demand curve D3 is ______.
  12. Inelastic
  13. Elastic
  14. Unit elastic
  15. Varying in elasticity along its length

Exhibit 4

  1. 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 curve ______.
  2. Shifts (down and) rightward from $2 to $1
  3. Shifts (up and) leftward from $1 to $2
  4. Does not shift from $1
  5. There is not enough information to answer the question
  6. 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 $1 to $2. As a result, the equilibrium price ______.
  7. Rises from $5,00 to $6.25
  8. Falls from $5.00 to $4.00
  9. Remains constant at $5.00
  10. NONE of the above
  11. 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 $1 to $2. What is the per-unit tax equal to?
  12. $1.00
  13. $2.25
  14. $0.25
  15. $4.00
  16. Which of the following is NOT an assumption of the theory of perfect competition?
  17. There are many sellers and many buyers, none of which is large in relation to the total sales or purchases.
  18. Each firm produces and sells a differentiated product.
  19. Buyers and sellers have all relevant information with respect to prices.
  20. There is easy entry and exit.
  21. Real-world markets that approximate the four assumptions of the theory of perfect competition include ______.
  22. Some agricultural markets
  23. The soft drink market
  24. The stock market
  25. BOTH (A) and (C)
  26. In the theory of perfect competition, ______.
  27. Sellers of the product are NOT influenced by other sellers and therefore have virtually complete control over the production and pricing of their product
  28. Buyers of the product may have a preference as to whom they purchase from based on brand loyalty
  29. Buyers and sellers of the product know everything that there is to know about the product
  30. 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
  31. A “price-taker” is a firm that ______.
  32. Does NOT have the ability to control the price of the product it sells
  33. Does have the ability, although limited, to control the price of the product it sells
  34. Can raise the price of the product it sells and still sell some units of its product
  35. Sells a differentiated product
  36. In the theory of perfect competition, ______.
  37. The market demand curve is horizontal
  38. The single firm’s demand curve is horizontal
  39. The single firm’s demand curve is downward sloping
  40. Both (A) and (B)
  41. Which of the following is an assumption of the theory of monopoly?
  42. There are extremely high barriers to entry.
  43. There are many sellers.
  44. The product has a number of close substitutes.
  45. The product is of extremely high quality.
  46. A natural monopoly exists when ______.
  47. A monopolist produces a product, the main component of which is a natural resource
  48. Economies of scale are so large that only one firm can survive and achieve low unit costs
  49. A firm is the exclusive owner of a key resource necessary to produce the firm’s product
  50. There are no close substitutes for a firm’s product
  51. A monopoly may exist because ______.
  52. Government has refused to grant a public franchise
  53. One firm has the exclusive ownership of a scarce resource
  54. The firm is so large and is currently experiencing such vast diseconomies of scale that it can out-compete all newcomers
  55. Both (A) and (B)
  56. In a monopolistically competitive industry, ______.
  57. Each firm in the industry produces a slightly differentiated product
  58. There are barriers to entry
  59. There are barriers to exit
  60. There are few sellers
  61. Which of the following industries is the best real-world example of monopolistis competition?
  62. Cotton
  63. Electricity generation
  64. Automobiles
  65. Service stations
  66. If a monopolistically competitive firm raises its price, then ______.
  67. It should expect to lose all of its customers because there are many other sellers of the product
  68. This is a trick question because the firm does NOT have the ability to change its price
  69. It should expect to lose some, but not all, of its customers
  70. It will be able to increase its profits
  71. Which of the following is an assumption of the theory of oligopoly?
  72. There are barriers to entry.
  73. There are many sellers and many buyers.
  74. Firms produce and sell either homogeneous or differentiated products.
  75. Both (A) and (C)
  76. Concentration ratios are NOT perfect guides to industry concentration, because they ______.
  77. Do not take into account foreign competition and competition from substitute goods
  78. Take into account foreign competition and competition from substitute goods
  79. Do not take into account advertising expenditures
  80. Do not take into account tax payment
  81. A concentration ratio indicates the ______.
  82. Number of firms in an industry
  83. Number of large firms in an industry compared to the number of large firms in another related industry
  84. Percentage of total sales accounted for by the (for example) four larger firms
  85. Percentage of sellers in an industry relative to the number of buyers
  86. 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?
  87. $34,500
  88. $12,500
  89. $65,500
  90. (-$35,500)
  91. A farmer has 1,000 acres on which he has previously grown corn. His yield per acre is 100 bushels of corn. If the corn payment rate is $0.43 a bushel, his production flexibility contract payment equals ______.
  92. $39,600
  93. $43,000
  94. $36,550
  95. $12,345

Part B. Concepts related to the use and analysis of records to manage resources

  1. Which function of management is concerned with monitoring the results of a decision and taking corrective action?
  2. Planning
  3. Implementation
  4. Control
  5. Organization
  6. Which of the following shows the proper sequence of management functions as they would be applied to a specific problem?
  7. Planning, control, implementation
  8. Planning implementation, control
  9. Control, planning, implementation
  10. Control, implementation, planning
  11. A short summary of why a particular business is in operation is called ______.
  12. Internal scanning
  13. External scanning
  14. A mission statement
  15. Whole farm plan
  16. “Doubling the number of acres farmed in 10 years” is an example of a ______.
  17. long-run goal
  18. short-run goal
  19. mission statement
  20. decision
  21. Which of the following is an example of a strategic decision?
  22. Determining fertilizer levels for crops
  23. Deciding when to sell grain
  24. Determining what type of business/legal organization to use
  25. Setting milking times for a dairy
  26. Which of the following is an example of a tactical decision?
  27. Balancing a livestock ration
  28. Forming a partnership with a relative
  29. Joining a feeder pig cooperative
  30. Installing an irrigation system
  31. “What managers do” is best described by which of the following?
  32. Gather information
  33. Make decisions
  34. Analyze data
  35. Organize the farm
  36. External scanning could include assessing ______.
  37. The financial condition of the business
  38. Changes in consumer tastes
  39. The basic values of the managers
  40. Productivity of the farmland owned
  41. One characteristic that makes decision making in agriculture different from other types of business is ______.
  42. More government regulation
  43. Prevalence of very large business units
  44. Predictability of production processes
  45. Fixed supply of a major resource such as land
  46. The term describing how much time is available to make a decision is ______.
  47. Imminence
  48. Revocability
  49. Frequency
  50. Importance
  51. Which phase of the strategic management process would be most influenced by a farm family’s basic values and attitudes about agriculture?
  52. External scanning
  53. Internal scanning
  54. Setting goals
  55. Strategic development
  56. A mission statement is ______.
  57. A list of important jobs the farm manager needs to accomplish in the near future
  58. A comprehensive plan to reshape the farm business over the next decade
  59. A set of goals to be achieved by a specific date
  60. A short summary of why a business exists
  61. The statement “To achieve an average feed conversion rate of 2.75 pounds of feed per pound of gain for my market hogs by 2007” is ______.
  62. A mission statement
  63. A goal
  64. A strategy
  65. An example of external scanning
  66. A fiscal accounting period is one which ______.
  67. Covers January 1 through December 31
  68. Is only 3 months in length
  69. Ends on any date other than December 31
  70. Can only be used by governmental agencies
  71. Selling grain from storage would be which type(s) of farm business activity?
  72. Operating
  73. Investment
  74. Financing
  75. Operating and investment
  76. When using cash accounting which of the following accounts would never be used?
  77. Grain sales
  78. Depreciation
  79. Fertilizer purchases
  80. Accounts payable
  81. A prepaid expense is one where payment is made ______.
  82. By check
  83. In an accounting period prior to the one in which the item will be used to produce income
  84. In a series of payments over time
  85. Before the bill is even received
  86. Which of the following would NOT be recorded when using a single-entry, cash accounting system?
  87. Charging $2,000 worth of chemicals at the farm supply store
  88. Billing a neighbor $850 for baling hay
  89. Recognizing that $3,476.34 of interest has accrued since the last interest payment
  90. ALL of the above
  91. One advantage of a double-entry accrual accounting system over a single-entry cash system is ______.
  92. It is easier to enter transactions
  93. A current balance sheet is always available
  94. Noncash transactions do NOT need to be entered
  95. It can be done on a computer
  96. An organization that develops and publishes guidelines for farm financial analysis and reporting is called the ______.
  97. Farm Accounting Association
  98. Farm Credit System
  99. Agricultural Analysis Association
  100. Farm Financial Standards Council
  101. At the end of the year, a farmer has an unpaid bill at the local machinery repair shop.