1. Location Biochemistry 1125
AAE 320 Final Exam Review
Paul D. Mitchell
Fall 2016
Monday Dec 19, 2016
2:45 PM – 4:45 PM
Location Biochemistry 1125

2. Goal Explain what to expect for final exam
Overview new topics since last exam
Idea of how to study

3. 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

4. Course Overview New Introduction Exam 1 Production Economics Exam 1
Farm Finance Exam 2
Taxes and Business Arrangements Exam 2
Ag Policy
Commodity Programs
Crop Insurance
Sustainability
New

5. New Topics: Ag Policy Ag Policy Commodity Programs Crop Insurance
Special Topics: Sustainability

6. 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 Program (MPP)
What triggers a payment for each?
Given formula and values, calculate payment
How payment changes under different circumstances

7. 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

8. 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

9. Crop Insurance Where do you buy insurance?
Crop insurance subsidies and premiums
What subsidization of premiums means
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?

10. 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

11. 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.

12. 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

13. 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)

14. 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

15. Contact me with Questions
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
best:
Contact me with Questions