AGRICULTURAL ECONOMICS III
(PRODUCTION ECONOMICS)
1. four ways of increasing labour efficiency on the farm
Training them
Giving incentives
Supervision
Good operator – worker relationship
Farm mechanization
Assigning tasks according to skills & specialization
Proper remuneration : Attractive salaries
2. a) graph representing the total egg production per week.
b) - Increasing returns production function.
3. (a) - Help to determine the value of the farm/ determine
assets and liabilities.
- Provide history of the farm.
- Assist in planning and budgeting in various fields.
- Helps to detect losses or theft in the farm.
- Assists when sharing losses or profits (dividends)for
communal owned farms/ partnership.
- Help to settle disputes in the farm among heirs.
- Help to support insurance claim e.g. against fire and theft.
- Provide labour information like terminal benefits, NSSF due,
Sacco dues for all employees.
- Help to compare the performance of different enterprises
within a farm or other farms.
- Help in the assessment of income tax to avoid over or under
taxation.
- Records, helps to show whether the farm business is making
profit or losses. This information
helps in obtaining credit.
(10 x 1 = 10 mks)
(b) - Training worker e.g. in F.T.C’s, during field days,
Agricultural shows, through
demonstrations and workshops.
- Measuring farm operations to supplement the labour force.
- Providing incentives to workers such as attractive wages,
free protective wear, housing, medical facilities, proper
feeding, rewarding good workers. Et.c
- Supervising and counseling workers.
- Creating good operator - worker relationships.
- Assigning specific tasks to the labor force.
(c) - Establishment of land ownership.
- Measurement of land size.
- Description of the land.
- Recording and mapping of the surveyed land.
- Solving objections if any.
- Submission of the maps and records to the district land office
registration
4. Three types of agricultural services available to the farmer
Credit
-
Extension and training
-
Agricultural research
-
Banking
-
Artificial insemination
-
-
Veterinary
5. Four management guideline questions which assist a farm
manager in making accurate
farm decisions
- What product to produce?
- How much to produce?
- What to produce?
- For whom to produce?
6. - Training
- Farm mechanization
- Labor supervision
- Giving incentives and improving terms and conditions of
service
Assign specific tasks
7. - Fertilizers - Seeds
- Pesticides -Casual labor
8. - Banking
-Extension and training
-Credit facility
-Agricultural research
-Marketing
-Farm input supplies
Tractor hire service
9. (a) Is the sum total of goods and services produced by a
country within a period of one year (b) -Per capital income: Is
the gross national income divided by the number of people living
in a country
10. -Diversification- Setting up several and different enterprises
on the farm. If one fails the
farmer cannot incur total loss.
- Contracting- farmers can enter into contract with
consumers. It guarantees a constant fixed market for
goods/services
- Insurance- Taking an insurance cover to compensate them
incase of loss
- Input rationing- Farmers can control the quantities of inputs
used in various enterprises to reduce losses
- Flexibility in production methods- Ability to change from
one enterprise to another in response to demand changes
- Adopting modern methods of production e.g. disease
control, irrigation, mechanization e.t.c.
11. Application of fertilizer
Input Out put 90kg Average Marginal
50kg bag maize product (AP) product (MP)
bag
fertilizer
0 6 - 0
1 10 10 4
2 24 12 14
3 31 10.33 7
4 36 9 5
5 40 8 4
6 43 7.18 3
7 43 6.14 0
8 40 5 -3
(ii) The best level of production in relation to the inputs and
out put is level 3
(b) (i) Gross margins for the crops
(i) Maize
Value of 5,500 x 15 = 82,500/=
maize/incomve (1mk)
Cost of labour 50x 150 = 7,500/=
(1mk)
Cost of cultivation 1 x 3,000 = 3,000/=
/ha (1mk)
Cost of seed 25 x 100 = 2,500/=
(1mk)
Cost of DAP fertilizer 3 x 1,500 = 4,500/=
(1mk)
Cost of C.AN 3 x 1000 = 3,000/=
fertilizer (1mk)
Total variable costs 20,500/=
(1mk)
GM for maize 82,500 – 20,500 = 62,000
(1mk)
(ii) Beans
Value of 5,000 x 500 = 250,000/= (1mk)
beans/income
Cost of labour 75 x 200 = 15,000/= (1mk)
Cost of 1 x 3,600 = 3,600/= (1mk)
cultivation /ha
Cost of seed 20 x 80 = 1,600/= (1mk)
Cost of DAP 2 x 1,500 = 3,000/= (1mk)
fertilizer
Cost of C.AN 1 x 1000 = 1,000/= (1mk)
fertilizer
Total variable costs 27,200/= (1mk)
GM for beans 250,000 – 27,200 = 222,800
(1mk)
(b) (ii) The crop which is profitable from the calculation is
that : (1mk)
It is more profitable to grow beans than maize
12. a) ZONE I
- For each additional unit of input applied the output of maize
increased at an increasing
rate because the fertilizer resources are underutilized 1
(1x2=2 mks)
ZONE II
- For each additional unit of input applied the output of maize
increased at a decreasing
rate because the resources are used to the maximum1
(1x2=2 mks)
ZONE III
- For each additional unit of input applied the output of maize
decreases because
the fertilizer/ resources are excessively applied1
(1x2=2 mks)
b) ZONE II
13. Give four variable costs in maize production
Cost of fertilizer
Cost of seeds
Cost of pesticide
Cost of weeding
Cost of harvesting
Cost of casual labour
Cost of fuel
14.
ITEM QU NO. OF COST PER TOTAL VARIABLES
AN UNITS UNIT COST
TIT
Y
Weeding - - - 800 00
Seeds 20 2 300 600 00
Irrigation kg 2ha 600 1200 00
Ploughing - 2ha 500 1000 00
Clearing land - - - 1200 00
Planting - 2ha 400 800 00
Harvesting - 2ha 1 200 2400 00
DAP fertilizer - 2 10 000 20 000 00
DAN fertilizer 2b 2 700 1400 00
Gunning bags ag 32 40 1280 00
transport s - - 2000 00
2b
ag
s
32
-
Total variable cost 32 680 00
income 32bags 1200 38 400 00
Gross margin=total revenue-total variable cost
= 38400-32680 = 5720.00
15.
- Profit maximization is the profit in a production process
where the highest net returns (Net revenue) on invested
capital is realized/ when the difference between total
revenue (TR) and total cost (TC) is the highest point in a
production process/ where profit is highest
- Is where marginal revenue (MR) is equal to or almost equal
to marginal costs
16. a) i) Gross margins for the crops
Value of maize/ income 55000 X 15 = 82500 1 mark
Cost of labour 50 X 150 = 7500 1 mark
Cost of cultivation/ ha 1 X 3000 = 3000 1 mark
Cost of seed 25 X 100 = 2500 1 mark
Cost of DAP fertilizer 3 X 1500 = 4500 1 mark
Cost of CAN fertilizer 3 X 1000 = 3000 1 mark
Total variable costs 20500 1 mark
GM for maize 82500- 20500 = 62000 1 mark
ii) Beans
Value of beans/ income 5000 X 500 = 250000 1 mark
Cost of labour 75 X 200 = 15000 1 mark
Cost of cultivation/ ha 1 X 3600 = 3600 1 mark
Cost of seed 20 X 80 = 1600 1 mark
Cost of DAP fertilizer 2 X 1500 = 3000 1 mark
Cost of CAN fertilizer 1 X 1000 = 1000 1 mark
Cost of sprays 3000 1 mark
Total variable costs 27200 1 mark
GM for beans 250000 – 27200 = 1 mark
222800
iii) It is more profitable to grow beans than maize 1
mark
b)
- Size of the farm
- Climatic conditions
- Fairness objectives and preferences
- Existing market conditions
- Available resources
- Expected returns
17. - The farmer should grow groundnuts;
- The crop has a higher gross margin than cotton;
18. – The farmer may be able to estimate the required production
resource e.g labour capital e.t.c
- Assists farmer when e.g. labour capital etc
- Assists farmer in making management decisions;
- Helps to reduce uncertainties in the production process;
- Shows progress or lock of progress in farm business;
19. (a) (i) See the graph paper
(ii) 56 bags;(1x1=1mk)
(b) Table – ( 16x ½ =8mks)
Year Fertilizer Maize Marginal Average
applied output product product
(bags) (bgs)
1995 0 4 - -
1996 2 10 6 5
1997 4 28 18 7
1998 6 42 14 7
1999 8 52 10 6.5
2000 10 60 8 6
2001 12 66 6 5.5
202 14 66 0 4.7
2003 16 64 -2 4
(c) (i) 4 bags (1x1=1mk)
(ii) MP is maximum; AP is maximum; (2x1=2mks)
(d) Gross income = Total output x price per unit
in 2002 66 x 1000 = 66000/= (1x1=1mk
in 2003: 64 x 1000 = 64000/= (1x1=1mk)
(ii) Net income = Total income – Total cost
in 1999: Total income was 52 x 1000 = 52000/=
total cost was 8 x 1200 = 9,600/=
Hence 5200/= - 9600; (1mk)
= Shs. 42,400/= (1mk)
21.
Flood costs (F.C)
Variable costs (V.C)
Total costs (T.C)
Average costs (A.C)
Marginal costs (M.C)
22.
Co-operative societies
Crop boards
Commercial banks
Agricultural finance corporation (A.F.C)
Settlement fund trustees
Hire purchase companies
Insurance companies. (Any 4 )
23. three ways in which labour peaks can be overcome in the
farm
Overtime working for casual labourers
Greater use of casual workers
Mechanization
Use of contractors who may be engaged to do some work
at a fee
Cropping system devised such that ripening of crops could
be at different times
Work study to devise new techniques of doing work more
quickly and efficient
24 . - training
-giving incentives/motivation
-farm mechanization
-labour
25. (a) 1000kg of NAP con 46kg P2O5S
150 x 100 – 150
50
300kg of DAP per hectar
1ha = 300kg of DAP
5ha x 300
1 = 1500g of DAP
1 bag = 50kg
1500 x 1 = 1500kg
50 = 30bags pf DAP
N/B Approximation = 3obags
CAN
100kg contain 20kg of price N
200x 100 = 200kg
30 = 1000kg
I ha = 1000kg
5ha = 1000 x 5 = 5000kg
1bag = 50kg
5000 x 1 = 5000kg
50
= 100bags of CAN
(b) (i) – cross margin is variable cost – total revenue
Gross margin of irish potatoes
Cost of fert = shs 10000 x 5 = 50000
Cost labour requirement = 50 x 200 x 5 = 50,000
Cost of seed potatoes 20,000 x 5 = 100000
Cost of fungicides 5000 x 5 = 25000
Cost of ploughing 400 x 5 = 50,000
Total variable cost shs.145,000
Total revenue = shs.50,000 x 50 = shs.1,500,00
Gross margin shs. 1,500,000 – shs.145,000
=shs.1,255,100
(i) Maize
Cost of fert. shs 10000 x 5 = shs.50000
Cost of fert. shs. 4800 x 5 = shs.24000
Cost of maize seed shs.3000 x 5 = shs.15000
Cost f labour shs.200 x 150x 5 = shs.150000
Cost of ploughing shs.4000 x 5 = shs.20000
Total cost = shs.259000
Revenue 750000 X 5 X 20= Shs.750000
Gross margin = 750000
- 259000
Shs.481000
(ii)He should grow potatoes
- pests
Diseases
Unreliable rainfall
Change in temperature
Strong wind
Light aspect
Infertile soils
