Deck 16: Agribusiness Management

Question 1

Agribusiness management is:

A) different than management in other businesses
B) giving instructions to hired workers
C) making good economic decisions in a rapidly-changing industry
D) selling at the local price

Answer 1

C

Question 2

The food supply chain includes all except:

A) farm services
B) processors
C) marketers
D) consumers

Answer 2

D

Question 3

for every dollar spent in the grocery store, what percent is the farm value?

A) 15
B) 25
C) 35
D) 65

Answer 3

A

Question 4

Big food processors are due to:

A) diminishing returns
B) economies of scale
C) profits
D) the Law of Demand

Question 5

The history of agriculture is characterized by:

A) doing things the same way
B) continuous change
C) more farmers
D) less machinery

Question 6

The functions of management include all except:

A) planning
B) implementation
C) delegation
D) adjustment

Question 7

All of the following have contributed to the importance of human resources in agriculture over time, except:

A) international trade
B) larger agribusiness firms due to economies of scale
C) more complex laws and regulations
D) specialization of resources

Question 8

agribusiness managers can make good deciosn by:

A) using accounting principles
B) thinking like an economist
C) using intuition
D) using nominal dollars

Question 9

Risk in agriculture is due to all of the following except:

A) weather
B) volatile markets
C) futures markets
D) international trade

Question 10

Risk is defined as:

A) known outcomes, known probabilities of outcomes
B) unknown outcomes, known probabilities of outcomes
C) known outcomes, unknown probabilities of outcomes
D) unknown outcomes, unknown probabilities of outcomes

Question 11

Uncertainty is defined as:

A) known outcomes, known probabilities of outcomes
B) unknown outcomes, known probabilities of outcomes
C) known outcomes, unknown probabilities of outcomes
D) unknown outcomes, unknown probabilities of outcomes

Question 12

An example of risk is:

A) murder
B) climate change
C) coin toss
D) weather

Question 13

An example of uncertainty is:

A) coin toss
B) weather
C) insurance
D) risk mitigation

Question 14

Insurance can be used to mitigate:

A) risk
B) uncertainty
C) both A and B
D) neither A nor B

Question 15

One strategy used by producers to reduce uncertainty is:

A) the price elasticity of demand
B) profit-maximization
C) diversification
D) the Law of Demand

Question 16

The worst recession since the Great Depression occurred in:

A) not enough information to know
B) 2010-2012
C) 2008-2009
D) 2000-2001

Question 17

Cash markets are defined by:

A) markets when good delivery is at the same time as payment
B) price is determined now, good delivery is later
C) good delivery is now, payment is later
D) not enough information to know

Question 18

Futures markets are defined by:

A) markets when good delivery is at the same time as payment
B) price is determined now, good delivery is later
C) good delivery is now, payment is later
D) not enough information to know

Question 19

Grain buyers developed forward prices to:

A) reduce risk
B) reduce uncertainty
C) increase profits
D) avoid taxes

Question 20

Forward prices in agriculture are used in:

A) commodity markets
B) input markets
C) both A and B
D) neither A nor B

Question 21

Contract farming:

A) is a production contract between producer and buyer
B) specifies physical production attributes and prices
C) both A and B
D) neither A nor B

Question 22

A speculator strives to:

A) make money on futures markets
B) reduce risk on futures markets
C) enhance risk on futures markets
D) none of the above

Question 23

A hedger strives to:

A) make money on futures markets
B) reduce risk on futures markets
C) enhance risk on futures markets
D) none of the above

Question 24

Basis is the difference between:

A) the futures contract price and local cash price
B) the futures contract price and the Chicago Board of Trade price
C) the local cash price and the futures contract price
D) the Chicago Board of Trade price and the futures contract price

Question 25

The price of a futures contract

A) does not fluctuate
B) fluctuates less than the cash price
C) fluctuates more than the cash price
D) fluctuates equally with the cash price

Question 26

Hedging is used to:

A) lock in prices of commodities
B) lock in price of inputs
C) both A and B
D) make profits based on price fluctuations

Question 27

Commodity options:

A) Allow traders to bet on the price of a futures contract going higher or lower
B) are the right to buy or sell a futures contract
C) are the obligation to buy or sell a futures contract
D) both A and B

Question 28

A strike price is a:

A) cash price
B) futures price
C) the price that a buyer of a commodity option buys or sells at
D) none of the above

Question 29

Calls are:

A) purchased when the futures price is expected to decrease
B) purchased when the futures price is expected to increase
C) purchased when the futures price is expected to remain constant
D) none of the above

Question 30

Puts are:

A) purchased when the futures price is expected to decrease
B) purchased when the futures price is expected to increase
C) purchased when the futures price is expected to remain constant
D) none of the above

Question 31

One dollar today is:

A) worth more than one dollar next year
B) worth less than one dollar next year
C) worth the same as one dollar next year
D) not enough information to know

Question 32

Present Value is:

A) the value of one dollar in the past
B) the value of one dollar at the time of receipt
C) the value of revenues received in the future today
D) the value of revenues received in the future last year

Question 33

What is the PV of 1.10 USD received on year from today if i=0.10?

A) 1.10 USD
B) 1.21 USD
C) 1.00 USD
D) not enough information to know

Question 34

Compounding is:

A) valuing current dollars in future dollars
B) valuing current dollars in past dollars
C) the opportunity cost of money
D) the PV

Question 35

Discounting is:

A) valuing current dollars in future dollars
B) valuing current dollars in past dollars
C) the opportunity cost of money
D) the PV

Question 36

Net Present Value is:

A) the PV of a future income stream
B) the PV of a future income stream minus the current cost of the project
C) the PV of a future income stream plus the current cost of the project
D) the PV of a future income stream in yesterday's dollars

Question 37

If NPV is positive:

A) the project is expected to be profitable
B) the project is expected to be break even
C) the project is expected to not be profitable
D) not enough information to know

Question 38

If NPV is negative:

A) the project is expected to be profitable
B) the project is expected to be break even
C) the project is expected to not be profitable
D) not enough information to know

Question 39

A perpetuity is:

A) a futures contract
B) the opportunity cost of money
C) an asset that provides positive revenues that continue forever
D) an asset that provides positive revenues for a fixed period

Question 40

The NPV of a perpetuity equals:

A) PV/i
B) FV/i
C) i/PV
D) i/FV

Question 41

If an agribusiness firm receives 10,000 USd each year forever, and i=0.10, then the NPV of this project equals:

A) 10,000 USD
B) 100,000 USD
C) 50,000 USD
D) not enough information to know

Question 42

If an agribusiness firm receives 10,000 USd each year forever, and i=0.20, then the NPV of this project equals:

A) 10,000 USD
B) 100,000 USD
C) 50,000 USD
D) not enough information to know

Question 43

Banks generate revenue by:

A) charging interest and fees on loans
B) charging interest and fees on savings
C) renting out space to businesses
D) home and business ownership

Question 44

If the NPV of a project is positive:

A) investors should invest in the project
B) investors should not invest in the project
C) the project should be undertaken
D) not enough information to know

Question 45

A perpetuity is:

A) always worth more than an asset of fixed life
B) neve worth more than an asset of fixed life
C) a good investment
D) not enough information to know

Question 46

Good agribusiness decisions:

A) compare benefits and costs of all activities
B) are made by thinking like an economist
C) discount future revenues and costs into today's dollars
D) all of the above

Question 47

A forward price is:

A) a cash price
B) a futures price
C) a commodity price
D) an unrealistic price

Question 48

Insurance works by:

A) turning risk into uncertainty
B) eliminating risk
C) pooling risk across households and farms
D) buying risky contracts

Question 49

Major futures markets in US agricultural commodity markets include:

A) The Chicago Board of Trade
B) The Chicago Mercantile Exchange
C) both A and B
D) neither A nor B

Question 50

Most gain producers use futures markets to:

A) speculate on commodity markets
B) hedge their grain crop
C) insure against pests and diseases
D) gamble on big earnings

Question 51

List and explain the four major sectors of the food supply chain.

Question 52

Explain why the farm value of one dollar spent on food is equal to 15 cents.

Question 53

Describe how an agribusiness firm would conduct strategic planning and management.

Question 54

Carefully define and explain the two terms, "risk" and "uncertainty."

Question 55

Explain how a corn farmer in Iowa could use futures markets to mitigate price risk.

Question 56

Explain how contract farming works.

Question 57

Define and explain the difference between a speculator and a hedger.

Question 58

What is "basis risk," and why is it important?

Question 59

Show your employer how you would discount future revenues to make them comparable to today's dollars.

Question 60

Show your employer how you would compound revenues from previous years to make them comparable to today's dollars.

Question 61

What is the PV of USD 1000 earned over the next five years?

Question 62

Calculate the NPV of a project that costs USD 20,000 today and returns USD 8,000 for the following six years.