Farm Management MCQ Quiz Questions And Answers
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What do you know about farm management practices? Do you think you can crack this 'Farm management MCQ quiz' that we have designed below? Farm management is not very easy and simple to understand. It involves making a lot of important decisions about how to organize and operate a farm for maximum production and profit. If you wish to see how much you know about it, then try this quiz and see how many marks you can score. Good luck!
Questions and Answers
- 1.
The selling of a commodity futures contract to protect a producer from price fluctuations in the market place at the time the product is sold is called:
- A.
Hedging
- B.
Hedger to arrive
- C.
Intrinsic value
- D.
Put option
- E.
None of the above
Correct Answer
A. HedgingExplanation
Hedging is the correct answer because it refers to the practice of selling a commodity futures contract to protect a producer from price fluctuations in the market. By entering into a futures contract, the producer can lock in a price for their product, ensuring that they will receive a certain amount of money regardless of how the market price may change. This helps to mitigate the risk of price volatility and provides stability for the producer's business.Rate this question:
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- 2.
The difference between the local cash market and the futures market is called the
- A.
Average
- B.
Basis
- C.
Contract
- D.
Deduction
- E.
None of the above
Correct Answer
B. BasisExplanation
The difference between the local cash market and the futures market is referred to as the "basis." Basis represents the discrepancy in price between the spot market (where the physical commodity is bought and sold for immediate delivery) and the futures market (where contracts for future delivery are traded). It is an important concept for traders and investors to understand as it can provide insights into supply and demand dynamics and potential arbitrage opportunities.Rate this question:
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- 3.
How many pounds of 44% protein soybean meal must be mixed with 10% protein wheat to make a ton of 16% protein feed?
- A.
275 pounds
- B.
353 pounds
- C.
375 pounds
- D.
487 pounds
- E.
None of the above
Correct Answer
B. 353 poundsExplanation
To find the amount of soybean meal needed, we can set up a proportion based on the protein content. Let x represent the pounds of soybean meal. The protein content in the soybean meal is 44% of x, and the protein content in the wheat is 10% of (2000 - x) since we want to make a ton (2000 pounds) of feed. We can then set up the equation: (44/100) * x + (10/100) * (2000 - x) = (16/100) * 2000. Simplifying this equation gives us 0.44x + 200 - 0.1x = 320. Solving for x, we get x = 353 pounds. Therefore, 353 pounds of soybean meal must be mixed with the wheat to make a ton of 16% protein feed.Rate this question:
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- 4.
Which of the following land characteristics is used to determine an agricultural land's value for Missouri property tax calculations?
- A.
The slope of the land
- B.
The erosion of potential land
- C.
The color of the soil
- D.
The productivity potential of the land
- E.
All of the above
Correct Answer
E. All of the aboveExplanation
The value of agricultural land for Missouri property tax calculations is determined by considering all of the given land characteristics. The slope of the land is important as it can affect drainage and erosion potential. The erosion potential is another crucial factor as it determines the long-term sustainability of the land. The color of the soil can indicate its fertility and nutrient content, which influences its value. Lastly, the productivity potential of the land is a key factor as it directly relates to its ability to generate income from agricultural activities. Therefore, all of these characteristics are taken into account when calculating the value of agricultural land for property tax purposes.Rate this question:
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- 5.
How many square feet are in an acre?
- A.
5,280
- B.
12,250
- C.
43,560
- D.
100,000
- E.
None of the above
Correct Answer
C. 43,560Explanation
An acre is a unit of area commonly used in the United States and other countries. It is equal to 43,560 square feet. Therefore, the correct answer is 43,560.Rate this question:
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- 6.
In Missouri which of the following is not taxed as personal property:
- A.
Calves between 300-600 pounds
- B.
Sows
- C.
Grain stored on farm premises
- D.
Horses
- E.
None of the above
Correct Answer
C. Grain stored on farm premisesExplanation
In Missouri, grain stored on farm premises is not taxed as personal property. This means that farmers do not have to pay taxes on the grain they have stored on their farms. Personal property taxes are typically levied on items such as vehicles, livestock, and equipment. However, in this case, the grain stored on the farm is exempt from taxation, providing a benefit to farmers in the state.Rate this question:
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- 7.
A firm should shut down in the short-run if it can not cover its
- A.
Fixed cost
- B.
Total cost
- C.
Variable cost
- D.
Time cost
- E.
Overhead costs
Correct Answer
C. Variable costExplanation
A firm should shut down in the short-run if it cannot cover its variable cost. Variable costs are expenses that fluctuate with the level of production or business activity, such as raw materials, labor, and utilities. If a firm cannot generate enough revenue to cover these variable costs, it means that it is not generating enough sales or income to sustain its operations. In such a situation, it would be more cost-effective for the firm to shut down temporarily rather than continue operating at a loss. Shutting down allows the firm to minimize its losses and reassess its business strategy.Rate this question:
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- 8.
The best indication that a farmer is making financial progress year-to-year is
- A.
An increase in net worth on the balance sheet
- B.
A decrease in the value of total liabilities on the balance sheet
- C.
An increase in the value of total assets on the balance sheet
- D.
An increase of total cash flow on the cash flow statement
- E.
A decrease in the value of his non-current liabilities
Correct Answer
A. An increase in net worth on the balance sheetExplanation
The best indication that a farmer is making financial progress year-to-year is an increase in net worth on the balance sheet. Net worth is calculated by subtracting total liabilities from total assets, and an increase in net worth indicates that the farmer's assets are growing at a faster rate than their liabilities. This suggests that the farmer's financial position is improving over time, as their assets are increasing in value and/or their liabilities are decreasing.Rate this question:
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- 9.
When an increase in production of one enterprise causes a reduction in the production of another enterprise, the two enterprises are said to be:
- A.
Independent
- B.
Complementary
- C.
Supplementary
- D.
Competitive
- E.
None of the above
Correct Answer
D. CompetitiveExplanation
When an increase in production of one enterprise causes a reduction in the production of another enterprise, the two enterprises are said to be competitive. This means that they are in direct competition with each other, as an increase in one's production directly affects the other's production negatively. This suggests that they are operating in the same market or industry, vying for the same customers or resources.Rate this question:
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- 10.
In futures and options transactions, margins and commissions are paid to the
- A.
Broker
- B.
Commissioner
- C.
Owner
- D.
Hedger
- E.
None of the above
Correct Answer
A. BrokerExplanation
In futures and options transactions, margins and commissions are paid to the broker. A broker acts as an intermediary between buyers and sellers in financial markets and facilitates the execution of trades. They provide services such as order placement, trade settlement, and account management. In return for their services, brokers charge commissions, which are fees paid by clients for executing their trades. Additionally, margins are also paid to brokers as a form of collateral to cover potential losses in the event of adverse price movements. Therefore, the correct answer is broker.Rate this question:
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- 11.
When a producer sells with futures contract, the buyer becomes the
- A.
Marketer
- B.
Risk taker
- C.
Consumer
- D.
Aggressor
- E.
None of the above
Correct Answer
B. Risk takerExplanation
When a producer sells with a futures contract, the buyer becomes the risk taker. This is because the buyer is taking on the risk of the future price fluctuations of the underlying asset. By entering into a futures contract, the buyer agrees to buy the asset at a predetermined price on a specific future date. If the price of the asset increases, the buyer benefits as they can buy it at a lower price. However, if the price decreases, the buyer bears the risk of having to buy the asset at a higher price than the market value. Therefore, the buyer assumes the risk in this transaction.Rate this question:
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- 12.
Missouri agricultural land productivity values are set by:
- A.
An average of current agricultural land sales
- B.
Using the values set at the federal level
- C.
Using 83.3% of Iowa's values
- D.
The Missouri State Tax Commission
- E.
None of the above
Correct Answer
D. The Missouri State Tax CommissionExplanation
The correct answer is the Missouri State Tax Commission. This means that the Missouri State Tax Commission is responsible for setting the agricultural land productivity values in Missouri. This suggests that the commission plays a significant role in determining the value of agricultural land in the state, possibly for taxation purposes or other regulatory reasons.Rate this question:
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- 13.
If a futures option is not "in the money", the premium is only
- A.
Intrinsic value
- B.
Hedge
- C.
Call option
- D.
Put option
- E.
None of the above
Correct Answer
A. Intrinsic valueExplanation
If a futures option is not "in the money", it means that the option does not have any intrinsic value. Intrinsic value refers to the difference between the strike price of the option and the current market price of the underlying asset. If the option is not "in the money", it means that exercising the option would not result in any profit for the option holder. Therefore, the premium for such an option would only consist of its intrinsic value, which in this case is zero.Rate this question:
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- 14.
The ability of larger firms to be more profitable than smaller firms in the same industry is an example of:
- A.
Diminishing returns
- B.
Imperfect competition
- C.
Inelastic supply
- D.
Economies of scale
- E.
None of the above
Correct Answer
D. Economies of scaleExplanation
Economies of scale refers to the cost advantages that larger firms have over smaller firms in the same industry. As a firm grows in size, it can benefit from lower average costs due to factors such as increased specialization, bulk purchasing, and more efficient use of resources. These cost advantages allow larger firms to achieve higher levels of profitability compared to their smaller counterparts. Therefore, the ability of larger firms to be more profitable than smaller firms in the same industry is an example of economies of scale.Rate this question:
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- 15.
How many bushels are in a corn futures contract?
- A.
1,000
- B.
3,000
- C.
5,000
- D.
7,000
- E.
None of the above
Correct Answer
C. 5,000Explanation
A corn futures contract represents an agreement to buy or sell a specified quantity of corn at a predetermined price and future date. In this case, the correct answer is 5,000 bushels, which means that the contract is for the delivery or purchase of 5,000 bushels of corn.Rate this question:
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- 16.
The person who makes transactions for farmers hedging is
- A.
An accountant
- B.
A broker
- C.
A banker
- D.
A commissioner
- E.
None of the above
Correct Answer
B. A brokerExplanation
A broker is the person who makes transactions for farmers hedging. Brokers act as intermediaries between farmers and the market, helping farmers to buy or sell futures contracts to hedge against price fluctuations. They have expertise in the agricultural market and provide advice on when and how to execute transactions. Accountants primarily handle financial records and reporting, while bankers focus on providing financial services. A commissioner is a government official responsible for overseeing specific areas. Therefore, the correct answer is a broker.Rate this question:
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- 17.
The best measure of a firm's ability to make a short-term loan payment is
- A.
Debt/asset ratio
- B.
Current ratio
- C.
Solvency ratio
- D.
Leverage ratio
- E.
Net capital ratio
Correct Answer
B. Current ratioExplanation
The current ratio is the best measure of a firm's ability to make a short-term loan payment because it indicates the company's ability to cover its short-term liabilities with its short-term assets. It is calculated by dividing current assets by current liabilities. A higher current ratio suggests that the company has more than enough assets to cover its short-term obligations, making it more likely to make loan payments on time.Rate this question:
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- 18.
The money on deposit to ensure the performance of a futures contract is called
- A.
Basis
- B.
Commission
- C.
Margin
- D.
Premium
- E.
None of the above
Correct Answer
C. MarginExplanation
The correct answer is margin. In futures trading, margin refers to the amount of money that a trader must deposit with a broker in order to open and maintain a position. This margin serves as a form of collateral to ensure that the trader can meet their financial obligations in the event of losses. It acts as a security deposit and helps to protect both the trader and the broker.Rate this question:
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- 19.
A farmer is solvent
- A.
He has sufficient current assets to cover current debts
- B.
He has sufficient equity to cover debts
- C.
He has sufficient assets to cover all debts
- D.
He can pay all debts with all equity
- E.
He can pay off long term obligations within 30 years
Correct Answer
C. He has sufficient assets to cover all debtsExplanation
A farmer is considered solvent when they have sufficient assets to cover all debts. This means that the total value of their assets is greater than or equal to the total amount of their debts. Being solvent indicates that the farmer is financially stable and capable of meeting their financial obligations.Rate this question:
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- 20.
If the price of a commodity increases by 5% and the quantity purchased decreases by 10%, then the demand for this commodity is:
- A.
Upward sloping
- B.
Inelastic
- C.
Elastic
- D.
Unitary
- E.
Unstable
Correct Answer
C. ElasticExplanation
If the price of a commodity increases by 5% and the quantity purchased decreases by 10%, it indicates that the demand for this commodity is elastic. This means that the change in price has a greater impact on the quantity demanded, resulting in a relatively larger decrease in quantity purchased compared to the increase in price. Elastic demand is characterized by a high responsiveness to price changes, indicating that consumers are sensitive to price fluctuations and are likely to adjust their purchasing behavior accordingly.Rate this question:
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- 21.
The demand curve shows the relationship between:
- A.
Consumer tastes and quantity demand
- B.
Price in the quantity demand
- C.
Price in production cost
- D.
Money income and quantity demand
- E.
None of the above
Correct Answer
B. Price in the quantity demandExplanation
The demand curve shows the relationship between price and the quantity demanded of a good or service. It illustrates how the quantity demanded changes as the price of the good or service changes, holding all other factors constant. As the price increases, the quantity demanded typically decreases, and vice versa. Therefore, the correct answer is "price in the quantity demand."Rate this question:
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- 22.
A farmer has total assets of $400,000 of which land is $300,000. The farmer's debt: equity ratio is 3:1. What will the farmer's debt: equity ratio be if his land goes up in value by 15%?
- A.
0.75
- B.
0.92
- C.
1.18
- D.
2.07
- E.
2.45
Correct Answer
D. 2.07Explanation
If the farmer's land goes up in value by 15%, the new value of the land will be $300,000 + ($300,000 * 0.15) = $345,000. The farmer's total assets will now be $400,000 + ($345,000 - $300,000) = $445,000. The debt:equity ratio is calculated by dividing the debt by the equity. Since the debt:equity ratio is currently 3:1, the farmer's debt is $445,000/4 = $111,250 and the equity is $445,000 - $111,250 = $333,750. Therefore, the new debt:equity ratio is $111,250/$333,750 = 0.33:1 which simplifies to 2.07.Rate this question:
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- 23.
To provide protection against wind damage to the farm home, a person should purchase
- A.
Life insurance
- B.
Property insurance
- C.
Accident and health insurance
- D.
Liability insurance
- E.
None of the above
Correct Answer
B. Property insuranceExplanation
Property insurance is the correct answer because it provides coverage for damage to the physical structure of the farm home caused by wind or other perils. This type of insurance typically includes coverage for the dwelling itself, as well as other structures on the property, such as fences or sheds. It can also provide coverage for personal belongings inside the home. By purchasing property insurance, the person can ensure that they are financially protected in the event of wind damage to their farm home.Rate this question:
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- 24.
To purchase insurance, a person pays a/an
- A.
Deductible
- B.
Indemnity
- C.
Loss
- D.
Premium
- E.
None of the above
Correct Answer
D. PremiumExplanation
When purchasing insurance, a person pays a premium. A premium is the amount of money that an individual or business agrees to pay to an insurance company in exchange for coverage and protection against potential risks or losses. This payment is typically made on a regular basis, such as monthly or annually, and is based on factors such as the type of insurance, the level of coverage, and the individual's risk profile. The premium helps the insurance company to cover the costs of providing insurance and to ensure that they have sufficient funds to pay out claims when necessary.Rate this question:
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- 25.
The _________ tax is often referred to as the "death tax".
- A.
Excise
- B.
Medicare
- C.
Estate
- D.
Property
- E.
None of the above
Correct Answer
C. EstateExplanation
The correct answer is "estate". The term "death tax" is commonly used to refer to the estate tax, which is a tax imposed on the transfer of property after a person's death. This tax is levied on the estate, or the total value of the assets and property left behind by the deceased individual.Rate this question:
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- 26.
Agricultural Real Estate is assessed at 12% of its
- A.
True value
- B.
Real value
- C.
Productive capacity
- D.
Appraised value
- E.
None of the above
Correct Answer
C. Productive capacityExplanation
The correct answer is "productive capacity" because agricultural real estate is assessed based on its ability to generate income or produce crops. Assessing it at 12% of its productive capacity takes into account the land's potential for agricultural use and its ability to generate revenue. This approach ensures that the assessment reflects the true value of the property in terms of its agricultural productivity.Rate this question:
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- 27.
A 640-acre section of land is
- A.
A square mile
- B.
A square quarter mile
- C.
A square half mile
- D.
A quarter township
- E.
None of the above
Correct Answer
A. A square mileExplanation
A 640-acre section of land is equal to a square mile because there are 640 acres in a square mile. This means that if you were to divide a square mile of land into equal sections, each section would be 640 acres in size. Therefore, the statement "a 640-acre section of land is a square mile" is correct.Rate this question:
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- 28.
A series of periodic payments is called a(n):
- A.
Annuity
- B.
Budget
- C.
Present value
- D.
Future value
- E.
None of the above
Correct Answer
A. AnnuityExplanation
An annuity is a series of periodic payments, usually made at regular intervals, such as monthly or annually. It is commonly used in retirement planning or insurance policies, where individuals make regular contributions or receive regular payments over a specified period of time. Annuities provide a steady income stream and can help individuals plan for future financial needs. The other options, budget, present value, future value, and none of the above, do not accurately describe a series of periodic payments. Therefore, the correct answer is annuity.Rate this question:
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- 29.
The process of finding the future value of a present sum is called:
- A.
Amortizing
- B.
Budgeting
- C.
Compounding
- D.
Discounting
- E.
None of the above
Correct Answer
C. CompoundingExplanation
The process of finding the future value of a present sum is called compounding. Compounding refers to the concept of earning interest on both the initial amount of money and the accumulated interest. It involves reinvesting the interest earned, which leads to exponential growth over time. This is commonly used in financial calculations to determine the future worth of an investment or savings account. Amortizing refers to the process of gradually paying off a debt over time, budgeting is the process of planning and managing finances, and discounting involves calculating the present value of future cash flows.Rate this question:
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- 30.
John invested $4,000 of retirement savings in a load mutual fund. The expected annual rate of return is 6%. How many years will it take for the $4,000 to double? Utilize the Rule of 72 when calculating the answer.
- A.
3
- B.
6
- C.
9
- D.
12
- E.
None of the above
Correct Answer
D. 12Explanation
The Rule of 72 states that to estimate the number of years it takes for an investment to double, you divide 72 by the annual rate of return. In this case, the expected annual rate of return is 6%. Therefore, 72 divided by 6 equals 12. So it will take 12 years for the $4,000 investment to double.Rate this question:
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- 31.
An upward trend of market prices is referred to as a
- A.
Bear market
- B.
Bull market
- C.
Boar market
- D.
Buck market
- E.
None of the above
Correct Answer
B. Bull marketExplanation
A bull market refers to an upward trend in market prices. It is characterized by optimism, investor confidence, and increasing stock prices. During a bull market, the overall economy is usually strong, and there is a high demand for stocks. This leads to an increase in stock prices and a positive sentiment among investors. The term "bull" is used to represent strength and upward movement, which aligns with the rising market prices observed in a bull market.Rate this question:
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- 32.
To protect against a lawsuit where you have caused personal injury, you should purchase
- A.
Health insurance
- B.
Accident insurance
- C.
Property insurance
- D.
Liability insurance
- E.
None of the above
Correct Answer
D. Liability insuranceExplanation
To protect against a lawsuit where you have caused personal injury, you should purchase liability insurance. Liability insurance provides coverage for legal expenses and damages if you are found legally responsible for causing harm or injury to someone else. It helps protect your personal assets and provides financial support to cover medical bills, legal fees, and other related costs that may arise from a personal injury lawsuit. Health insurance, accident insurance, and property insurance do not specifically cover liability for personal injury caused by the insured party.Rate this question:
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- 33.
Farmer Smith has a debt-to-asset ratio of 55%. His debt-to-equity ratio must be
- A.
Negative
- B.
45%
- C.
Less than 100%
- D.
Less than 25%
- E.
Greater than 100%
Correct Answer
E. Greater than 100%Explanation
The debt-to-asset ratio measures the proportion of a farmer's assets that are financed by debt. A ratio of 55% means that 55% of Farmer Smith's assets are financed by debt. The debt-to-equity ratio, on the other hand, measures the proportion of a farmer's assets that are financed by equity or the owner's investment. Since the debt-to-asset ratio is already 55%, it means that the remaining percentage, which represents the equity, must be less than 45%. Therefore, the debt-to-equity ratio must be greater than 100%.Rate this question:
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- 34.
Using a higher discount rate will cause the present value of future earnings to:
- A.
Increase
- B.
Decrease
- C.
Remain constant
- D.
Decrease in short time periods but increase for time periods over 10 years
- E.
None of the above
Correct Answer
B. DecreaseExplanation
Using a higher discount rate will cause the present value of future earnings to decrease. This is because a higher discount rate reflects a higher opportunity cost of capital, meaning that the value of future earnings is reduced to account for the higher rate of return that could be earned elsewhere. As a result, the present value of those future earnings is lower when a higher discount rate is used.Rate this question:
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- 35.
A farmer purchases 500-pound feeder steers for $2.20 per pound and plans to sell the steers at 750 pounds. The farmer estimates the total cost of gain to be 60 cents per pound. The nearest breakeven price when the steers are sold at 750 pounds is:
- A.
0.83 dollars/pound
- B.
1.44 dollars/pound
- C.
1.67 dollars/pound
- D.
1.75 dollars/pound
- E.
None of the above
Correct Answer
C. 1.67 dollars/poundExplanation
The farmer purchases 500-pound feeder steers for $2.20 per pound, so the total cost of purchasing the steers is 500 pounds * $2.20/pound = $1100. The farmer estimates the total cost of gain to be 60 cents per pound, so the total cost of gain for each steer is 500 pounds * $0.60/pound = $300. Therefore, the total cost of each steer when it reaches 750 pounds is $1100 + $300 = $1400. Since the steers will be sold at 750 pounds, the breakeven price per pound would be $1400/750 pounds = $1.867/pound, which is closest to $1.67/pound.Rate this question:
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- 36.
A farm has an assessed value of $165,000. The local property tax levy is $3.96/$100 valuation. How much property tax will be owed this year
- A.
$65,340.00
- B.
$6,534.00
- C.
$784.08
- D.
$19,800.00
- E.
None of the above
Correct Answer
B. $6,534.00Explanation
The property tax owed can be calculated by multiplying the assessed value of the farm ($165,000) by the tax rate ($3.96/$100). To find the tax owed, divide the assessed value by 100 and then multiply it by the tax rate: ($165,000 / 100) * $3.96 = $6,534.00. Therefore, the correct answer is $6,534.00.Rate this question:
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