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test2-sample-key-2010

test2-sample-key-2010 - Exam II Example Name Part I True or...

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1 Exam II Example Name _______________________ ______________________________________________________________________________ Part I. True or False. Circle T for True or F for False. 10 pts. 2 pts each T F 1) Break-even yield is the same thing as the cost-of-production. T F 2) If two enterprises are competitive, the output of one must increase if the output of the other increases. T F 3) Enterprise budgets cover the revenues and expenses of producing one specific unit of crop or livestock. T F 4) In linear programming, all the constraints and the objective function are linear. T F 5) If returns above variable costs are negative for a producer's enterprise budget for a commodity, that product would generally not be produced on that farm. _________________________________________________________________

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2 Short problems. 1) 6 points. Assume you have a linear programming solution to a farm plan. On the pasture constraint, you have a dual value (shadow price) of \$30.00 per acre. On your corn activity you have a dual value (reduced cost) of \$20.00. Answer the following questions. a) If additional pasture can be rented for \$40 per acre, would you rent any? Why or why not? No. It is only worth \$30 in additional profits. b) Is corn currently in the solution? No. The non-zero shadow price tells me corn was not in the solution. c) Interpret the dual (reduced cost) on the corn activity. If I plant an acre of corn, the objective function will fall by \$20.
3 Short Definitions. 2. pts. each. 16 pts. total. SEE NOTES Whole-farm Budget Break-even Yield Gross Margin Production Possibilities Curve Supplementary Enterprises Complementary Enterprises Linear Programming Whole Farm Plan

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Short Problem I. 15 pts. Use the following enterprise budget information to answer the questions. Also, fill in any blanks in the budget. Wheat, 1 Acre, Some County ___________________________________________________________________ Gross Receipts bu/acre price Wheat Sales 50 @ \$3.60 \$180.00 Variable Costs Fertilizer 45.00 Chemicals 25.00 Other pre-harvest 35.00 5.25 110.25 Harvest expenses 25.00 Total Variable Costs 135.25 \$44.75 Fixed Costs 35 Total Costs 170.25 Net Returns \$9.75 Interest (10% for 6 months on the above) Returns above Variable Costs --------------------------------------------------------------------------------------------------- l) What is the cost of production per bushel? 170.25/50 = \$3.41 2) At what price will production stop in the short run?
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