AAE 320 Final Exam Review
Paul D. Mitchell
Fall 2015
Monday Dec 21, 2015
7:45 AM – 9:45 AM
Location 1221 Comp Sci
(Same Room as Lecture)
Goal
 Explain what to expect for final exam
 Overview new topics since last exam
 Idea of how to study
Study Aids
 Overheads, Think Breaks
 Course Readings: Fact Sheets, Extension Presentations etc.
 Problem Sets
 Exams taken this year
 Old Exams
 Expect this year’s final to be similar to, but not exactly the
same as, previous finals
Course Overview
 Introduction
 Production Economics
 Farm Finance
 Taxes and Business Arrangements
Exam 1
Exam 1
Exam 2
Exam 2
 Ag Policy
 Commodity Programs
 Crop Insurance
 Special Topics
 Farm Income and Rural Poverty
 Sustainability
New
New Topics: Ag Policy
 Commodity Programs
 Crop Insurance
 Special Topics
 Farm Income and Rural Poverty
 Sustainability
 Not covering Technology Change and Cochrane’s
Treadmill, even though on class page and old exams
Commodity Support Programs
 Know basic idea of how each works
 Price Loss Coverage (PLC)
 Agriculture Risk Coverage (ARC)
 Marketing Assistance Loans (MAL) and Loan
Deficiency Payments (LDP)
 Supplemental Coverage Option (SCO)
 Dairy Margin Protection
 What triggers a payment for each?
 Given formula and values, calculate payment
 How payment changes under different circumstances
Commodity Support Programs
 Terms to know:
 Base Acres, Payment Yield, Reference Price, County
Revenue Guarantee, Loan Rate, National Marketing Year
Average Price, Posted County Price
 Review initial slides for major stylized facts about commodity
support programs
 Good for true/false & short answer questions
 Stylized facts about ag subsidies from early notes on
commodity support and Farm Bill
 For ARC, do not worry about details like how to calculate
yield guarantee, just how it works
Crop Insurance
 Crop Insurance Programs
 Yield vs. Revenue Insurance Coverage
 Individual vs. Area-wide Coverage
 YP, RP, GRP, GRIP
 RP with harvest price exclusion
 CAT
 Coverage Level, Price Election, Unit Structure
 Supplemental Coverage Option (SCO)
 What triggers indemnities?
 How to calculate payments
Crop Insurance
 Crop insurance subsidies and premiums
 What subsidization of premiums means
 What is the Loss Ratio and implication for farmers
 Commodity program and crop insurance slides for crop
insurance stylized facts
 Other crops, LGM Dairy, Typical WI practices
 Good for true/false & short answer questions
 Where do you buy insurance?
Special Topics: Farm Income & Rural
Poverty and Sustainability
 What we talked about in class based on power points and
materials posted
 Read overheads and think about what we talked about
in class
 Skim the reading (Don’t let your babies grow up to be
farmers)
 Short answer, true false, multiple choice
Sustainability
 Three parts (people, profit, and planet)
 Life Cycle Assessments (LCA)
 What farmers typically do for current tools/assessments:
 Cool Farm Tool, Fieldprint Calculator, NISA Self-Assessment
 Measurement problem: Frontiers of Sustainability
 What do consumers think?
Key Concepts to Know: Exam 1
 Optimality conditions
 How much input to use
Value of Marginal Product = Input Price
 How much output to produce
Output Price = Marginal Cost
 Able to apply in table and calculus formats
 Nothing more than single input production
Key Concepts to Know: Exam 1
 Average Cost, Marginal Cost, Total Cost
 Calculations in table formats and relationships
 Opportunity Cost and Economic Profit
 What is it, how to interpret
 Be able to apply these concepts in context of problems,
as well as short answer
 See 1st Exam and problem sets this year, old final exams
 Miscellaneous (non-quantitative) topics
 Wisconsin Ag, strategic management, etc.
Key Concepts to Know: Exam 2
 Depreciation Methods
 Straight Line, IRS Method
 Financial Analysis
 Use Balance Sheet and Income Statement to calculate and
interpret ratios, returns, rates of return, profit margin
 Think breaks, problem sets and exams this year, old final
exams
 Look at old exams to see the types of major concepts to
know
Taxes, Business Arrangements, and
Asset Transfers
 Look over old exams and problem set, focusing on the
issues that stay the same, not details that vary
 Basic idea of how taxes work: Revenue minus Costs
 Benefit of Section 179
 Gain = Sale Price – Basis
 What triggers recognition of gain?
 Sell/buy or give/receive assets?
 Contribute to or remove from LLC or Corporation
 Why does Basis change? (Death, Depreciation)
Taxes, Business Arrangements, and
Asset Transfers
 Types of Taxes
 Ordinary income, self-employment, capital gain, gift
 Types of Business Arrangements
 Sole proprietor, partnership, corporation (C or S),
limited liability company (LLC)
 Main differences: Formation, Taxation, Liability
Exam Study
 Many questions on material from the first 2 exams:
Comprehensive Exam
 Focus on Key Concepts
 Big picture, not details
 Basic things to remember 5 years from now
 New Material an important focus
 See slides above
Contact me with Questions
 Email best: pdmitchell@wisc.edu