ARE 303 Exam 2

3 Standards of Comparison

Budgets, Comparative Farms, Historical trends

Measures of Liquidity

Working capital, Current Ratio, Working capital/gross revenue

Current ratio

Assets/Liabilities

working capital

assets - liabilities

Measures of solvency

Debt-asset ratio, equity-asset ratio, debt-equity ratio

Production Function

Shows the relation between different levels of input for corresponding levels of output

Total Physical Product (TPP)

Amount of production expected from using each input level

Average Physical Product (APP)

Average amount of output produced per input used

Average Value Product (AVP)

Value of output per unit of input

Marginal Physical Product (MPP)

Additional Total Physical Product (TPP) gained by using 1 additional unit of input

Marginal Value Product (MVP)

change in revenue associated with increasing input use by one unit.

Marginal Input Cost (MIC)

cost of buying one more unit of input

Marginal Revenue (MR)

change in revenue from producing and selling one more unit of output.

Marginal Cost (MC)

change in cost associated with producing one more unit of output.

3 types of substitution

Perfect substitution, decreasing rate, no substitution

Competitive enterprises

output of one enterprise cannot be increased unless output of the other decreases.

Supplementary enterprises

more output from one enterprise can be added without a change in the level of the other enterprise.

Complimentary Enterprises

as output of one enterprise increases, output of the other increases also.