CCA Agricultural Economics and Business Management 1 — Questions and Answers
Question 1: If total production costs are $480 per acre and expected yield is 160 bushels per acre, what is the break-even price per bushel?
- $2.50
- $3.00 (Correct answer)
- $3.50
- $4.00
Correct answer: $3.00
Break-even price = total cost per acre ÷ yield per acre = $480 ÷ 160 bu = $3.00 per bushel.
Question 2: Which of the following is classified as a variable cost in crop production?
- Cash land rent
- Machinery depreciation
- Seed and fertilizer (Correct answer)
- Annual property taxes
Correct answer: Seed and fertilizer
Seed and fertilizer are variable costs because they change directly with planting decisions and acres farmed, unlike fixed costs such as rent, depreciation, and taxes.
Question 3: Gross margin for a crop enterprise is calculated as:
- Total revenue minus all fixed and variable costs
- Total revenue minus variable (direct) costs only (Correct answer)
- Net income plus depreciation
- Total revenue minus machinery ownership costs
Correct answer: Total revenue minus variable (direct) costs only
Gross margin equals total revenue minus direct variable costs, measuring profitability before fixed overhead costs are subtracted.
Question 4: A cash rent lease arrangement means the tenant pays the landowner:
- A percentage of the harvested crop value each year
- A fixed dollar-per-acre amount regardless of yield or price (Correct answer)
- An amount determined after harvest based on actual costs
- Grain in lieu of cash payment
Correct answer: A fixed dollar-per-acre amount regardless of yield or price
Cash rent is a predetermined fixed dollar-per-acre annual payment to the landowner that does not vary with commodity prices or crop yields.
Question 5: Which marketing tool allows a grain producer to lock in a selling price for a crop before harvest?
- Spot market sale at harvest
- Forward cash contract (Correct answer)
- Basis contract
- Hedge-to-arrive contract
Correct answer: Forward cash contract
A forward cash contract is an agreement between a producer and a grain buyer to sell a specific quantity at a predetermined price for a set delivery date, eliminating price risk.
Question 6: Enterprise analysis in farm management is primarily used to:
- Calculate the market value of farmland
- Determine the profitability of each individual crop or livestock enterprise (Correct answer)
- Estimate the cost of a new machinery purchase
- Project future commodity prices
Correct answer: Determine the profitability of each individual crop or livestock enterprise
Enterprise analysis allocates revenues and costs to individual enterprises such as corn or soybeans to determine which are profitable and guide resource allocation decisions.
CCA Agricultural Economics and Business Management 1
If total production costs are $480 per acre and expected yield is 160 bushels per acre, what is the break-even price per bushel?