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CHAPTER 11
2. If an acre of alfalfa requires $75 of operating capital and 5 hours of labor, and a farm has 70
acres of land, 400 hours of labor, and $4,500 of operating capital available, the maximum
acres of alfalfa that can be grown is:
a. 50
b. 60
c. 70
d. 80
3. When developing a whole farm plan and no more enterprises can be added because one
resource is exhausted, it may still be possible to increase gross margin by replacing one
enterprise with another enterprise that has a higher gross margin per:
a. acre
b. bushel
c. unit of excess resource
d. unit of limiting resource
8. When comparing several long-range whole-farm budgets with different quantities of major
fixed resources such as owned land or permanent labor, the prices used to estimate gross
income should be:
a. current prices on the date the budget is made
b. prices expected when this year's products are sold
c. average prices from the previous year
d. expected average prices over the next several years
11. In linear programming to maximize farm profits, "reduced cost" tells you:
a. the amount profit would increase if the operator could produce one more unit of an
enterprise
b. the amount profit would decrease if the operator produces a unit of an enterprise
not currently in the linear programming solution
c. the amount profit would increase if the operator had one more unit of a limited resource
d. none of the above
12. In linear programming to maximize farm profits, "shadow price" tells you:
a. the amount profit would increase if the operator could produce one more unit of an
enterprise
b. the amount profit would decrease if the operator produce a unit of an enterprise not
currently in the linear programming solution
c. the amount profit would increase if the operator had one more unit of a limited
resource
d. none of the above
T F 2. Farms that carry out the same type and scale of enterprise year after year do not
need to develop a whole-farm budget.
T F 4. Principal payments on noncurrent debts are needed for analyzing profitability, but
not liquidity.
T F 5. Sensitivity analysis in whole-farm budgeting looks at how net income and cash
flow would be affected by changes in key prices or production rates.
T F 6. Crop and livestock inventories held over from last year can be ignored when
doing a long-run budget.
T F 7. Changing from one whole-farm plan to another may require several transitional
years in which net income and cash flow are different than in a typical year.
T F 9. The shadow price or dual value for a resource in a linear programming solution
shows how much total costs would increase if one more unit of the resource
were available.
T F 10.One way that goals other than profit maximization can be included in whole farm
planning is by restricting the types of enterprises considered.
T F 11. The first step in whole farm planning is to prepare the whole farm budget.
T F 12.In linear programming, all the constraints and the objective function are linear.