Module 3 Flashcards
What are the 3 Kinds of values in Forestry?
Intangible, tangible, and values based from the method used or purpose
What are the 6 intangible values?
Sentimental, Artistic, Scenic, Recreation, Intrinsic, Scientific
What are the 5 tangible values?
Use, Scarcity, Monopoly, Luxury, Nuisance
What are the 10 values according to the method used?
Speculative, Liquidation, Salvage, Appraisal, Assessed, Cost, Capital, Realization, Replacement, Market values
It is the basis of most tangible values
Use
How is “use” measured?
- Profitability,
2. Different ways of using an article or piece of land
When is scarcity value high?
When a product is both 1) Useful and 2) Rare
An artificial scarcity value created by human control of a product or property
Monopoly Value
Expensive or rare articles irrespective of their utility
Luxury value
A piece of property must be used in such a way as to cause inconvenience or loss to another person
Nuisance value
Remaining value of a property after its usefulness for its original purpose is gone
Salvage value
Evaluation in monetary terms the exact amount of all types possessed by a piece of property
Appraisal value
Appraisal value must be always in terms of _____ because a property may have different uses and hence different values
Stated values
Set upon on property by a public official for taxation purposes based on the sale value of the asset
Assessed value
The present monetary value of a piece of property as determined by the sum of all its past cost to the owner, to which compound interest at a given rate on the sums invested is added
Cost value
A mathematical determination of use value obtained by capitalizing present earning on the assumption that they will be perpetuated or will continue for a given time
Capital value
What are the four alternative terms for capital value?
- Discount value
- Present value
- Expectation value
- Soil expectation value
The difference between the values of raw materials and finished product
Realization value
The value of forest based on what it would cost plus interest at a given rate to produce an equivalent stand in kind and volume
Replacement value
Replacement value is equivalent to ___ if prices prevail at the time of destruction
Cost value
A modified form of cost value – one of the bases for appraising damages to forests
Replacement value
Standard values or prices that have been arrived
Market values
When should the buyer and seller agree upon the price of a property?
If there is no standard value upon selling
The resultant of the seller’s desire to sell and the buyer’s desire to buy the product
Selling Price
The seller sets a _____ he hopes to get and a ______ below which he will not sell
maximum, minimum
What does the price paid represent (2)?
1) Desire to sell by the seller
2) Desire to buy by the buyer
What are the 3 Parts of the Cost Curve?
- Total Cost (Fixed+Variable Costs)
- Average Cost
- Marginal Cost
Relationship between the amount of variable inputs used and the output produced
Production function
Production function is also called ____ or ____
factor-product or input-output relationship
What is the algebraic expression of the production function?
Y = f(Xi; X2,…,Xn)
The number of factors that are fixed and variable depends on _____?
The length of planning horizon (short-run or long-run)
What are the 3 forms of production function?
- Constant production function
- Diminishing production function
- Increasing production function
What do the 3 forms of production function consider (2)?
One variable:
- Input
- Output
What are the 2 other technical relationships of input and output?
- MPP (Marginal Physical Product)
2. APP (Average Physical Product)
What is the formula of MPP?
MPPxi = Change in Y/Change in Xi y = number of total products Xi = variable input
What is the formula of APP?
APPxi = Y/X y = total product x = amount of variable input used
What happens during stage I of the production function?
Initially, MPP and APP rises at an equal rate
MPP rises at a greater than APP
MPP lowers at a greater rate than APP
In the end, MPP = APP
What happens during stage II of the production function?
APP and MPP is both decreasing
APP > MPP
In the end, MPP = 0
What happens during stage III of the production function?
Both APP and MPP are decreasing
APP > MPP
APP remains positive
MPP is negative
The additional or marginal income received from using an additional unit of input
MIC
What is the profit-maximizing level of input?
MVP = MIC or MFC
What is the formula of MVP?
MVP = Change in TVP/Change in the level of input
What is the formula of TVP?
TPP = TPP*Py
The formula of MVP using MPP?
MVP = MPP*Py
The change in total input cost or the
addition to total input cost due to an additional unit of input
MIC
What is the formula of MIC
MIC = Change in TIC/Change in the input levels
What is the formula of TIC?
TIC = X*Px
What is equal to MIC?
MIC = PX
In this condition, additional profit can be made by using more input
MVP > MIC
Compared by a record of time necessary to perform them
Efficiency of operations
What unit is used for the comparison of the efficiency of operations?
Man-time
If an average man working under average
conditions can plant a hectare of ipil-ipil
seedlings in 12 hrs, what are the man-hour and man-day assuming an 8-hr job?
12 man-hour job and 1.5 man-day job
This unit is partially valuable in comparing the efficiency of work under different wage scales
Time units
This unit are also used for animal and
power transport
Time units
The wage rate varies according to (2)?
- Time
2. Place
Offer about the only possible
measure for real efficiency of certain
classes of operations
Time units
The cost of making the same type of product varies according to (6)?
- Time
- Type of Plant
- Place
- Labor rates
- Quality of raw materials
- Distance of plant from raw materials
Sometimes, as between competitive plants, cost ____ differ much in total but greatly in detail, sometimes, it is the ___.
may not, reverse
What are the 3 ways of reducing cost and increasing profit?
- Mechanization
- Wage reduction
- Substitution of cheaper raw materials
The limits of mechanization are set
by ___ and ____
- Progress and invention
2. Law of diminishing returns
Can be reduced only so far, beyond which, worker will refuse to work or will work so badly that labor cost again increases
Wages
Together with other factors, this fixes the price of raw materials.
Competition
Substitution of cheaper raw materials
carried too far, ____ the selling price of
the final product
reduces
More complete utilization of materials may increase cost because of ___ and ____
- Greater input of labor
2. Mechanical power necessary
When is fixed cost only reducible (2)?
- Operations are profitable enough to pay for indebtedness
2. Financing at low interest rates
What are the 3 usual kinds of prices?
- Mill
- Wholesale
- Retail
Prices quoted in _____ are
usually wholesale or mill prices
statistics
What are the 2 price variations?
- Short-term variation
2. Long-term variation
Prices that are expressed in cash
Monetary prices
Prices that are expressed in terms of purchasing power or gold
Real prices
Since the value of money is constantly changing, it is desirable to change monetary prices to ____ or _____
real or adjusted
What are the two ways of comparing prices?
- Monetary prices and real prices
2. Index or relative prices
The price comparison that turns prices into percentages of a given price or the price at a given time
Index or relative price
The price comparison that makes possible between price movements or different commodities measured in different units
Index or relative prices
Sometimes both systems are used by making
____ to real prices
Indices
Monetary prices may be converted to
real prices by coordinating them
either with (2)?
- Shifts in value of metallic units in which currency is based
- Purchasing value
Currency is based on what?
value of metallic units
Purchasing power is determined from an ___
all commodity index
The purchasing power consists in either (2)?
- PPI
2. Commodity index itself
It is the reciprocal of all commodity index
Purchasing Power Index
How to use the purchasing power index?
Divide price by PPI
How to use the commodity index?
Multiply price by CI
Usually published by a govt agency that is
given the task to determine such prices
Index Prices
Index prices are either ____ or _____ and have always a ____
Weighted or unweighted, base year
How do we compare the price movements of commodities?
Use index price in the same base
A lumber dealer with a year full of the stock facing a sudden decline in building operations in his community may be forced to sell his stock ____ what he paid for it and incur ___ in order to pay his current bill
below, losses
In the face of an increase in building activity, price goes ___ even though the previous price was well above his cost
up
In this industry, goods cannot be sold continuously at less than cost.
Private industry
The higher the cost of production, the ___ is being sold.
less product
If costs rise but selling prices remain stationary, ____ would disappear.
Profits
In the long run, prices tend to rise with ____ production costs and to decline with ____ ones.
increasing, decreasing
Prices that are often unaffected by production cost
Short-run prices
A producer whose costs are ____ can undersell his competitors and still make a profit
lower
Between two or more producers at the same costs and one producer is satisfied with a ___ profit, he also can undersell his competitors
lower
Prices could be set by the producers who operate at the ____ margin of profit.
Happens only if these producers can meet the demand because the lowest-cost manufacturers are ___ in number and may not be able to sell at such levels
lowest
In a time of lowest demand, prices are set by the ____ producers provided prices are _____ by the cost of production
lowest-cost, fixed
In normal times prices are set by the ____ producers
average-cost
In times of great demand, prices are set by the _____ operators
highest-cost
The producers whose costs are out of line with the prevailing prices stand to ____ or ___ according to the relationship of their costs to prevailing prices
gain or loss
Prices of raw materials vary according to _____ and _____ situations
supply and demand
An increase in raw material cost leads to an ____ in the prices of finished products so long as they cannot be compensated by
______ cost elsewhere in the production process
increase, decrease
Increasing scarcity or inaccessibility of raw materials tend to encourage the use of _____ that finally may _____ the use of original products and be an important factor in setting its prices
substitutes, decrease
Under competitive conditions, the _____ often has nothing to do with the current prices of finished products
total supply of raw materials
Under stable economic conditions, prices remain ____ but economic conditions not long remain stable.
reasonably fixed
What happens to prices in times of prosperity?
Generally increasing
What happens to the purchasing power of money in times of prosperity?
lower
What accompanies a period of prosperity (2)?
- Credit inflation
2. Wild speculation
What happens to paper values during times of prosperity?
Destroyed
What happens to employment during times of prosperity?
Decreased
In times of prosperity, demand for
goods are ____ since ___ prices already reduced the demand for these goods.
lower, high
Prices then would _____ and finally to a point where price structure would ____
slump to low levels, break down
What must be done to the price structure during depression periods?
Painfully built up again
In times of depression, both costs and selling prices generally tend to ___ and ___ in unison with _____ of the business cycle, but this does not follow for all items of costs, so that some prices may be thrown out of alignment with costs and others may not be _______.
rise and fall, fluctuations, affected
Who has many powers of price control?
Government
In times of war, emergency, or in other exceptional circumstances, prices may ___ or at least state a ____ and above that it may not go.
become fixed, maximum
In these types of commodities, the government attempts to ____ prices in the interest of a class of the population supposed to be in need of financial assistance.
increase
What is the formula for profit?
Profit = Total Revenue = Total Cost
Government, as a large ____ and ____ of goods and services, ____prices in the same manner as other large producers and consumers
buyer and seller, influence
In regulating some prices, the _____ affects others, and thus affects the _____.
government, price structure
The government tends to keep prices ____ at the benefit of the _____ rather than ___, and in general to ____ the extremes of the business cycle.
lower, consumers, producers, equalize
A business is making a profit over and above its _____
operational cost
A business may make an operating profit but
_____ of it has a heavy debt load
net profit
The operating profit is usually figured in terms of ______, sometimes for ____ or ____ periods, and sometimes for the _____
yearly operations, short or long, life of the entire operation
Total profit in a lumber operation ____ be
determined until it is concluded, perhaps ____ after it is started
cannot, 25 years
What are the two common strategies to maximize profit?
- Restrict expansion of operations and increase prices
2. Continue expanding and lower prices
Strategy #2 demands greater ____, ____, and ___ . Competition becomes ____ and will force them ____.
capital skills, managerial skills and business risk
If the largest number of businesses takes strategy #1, prices will be maintained at ____
high levels
Explain the chain of events when all lumber mills decide on a high-production low unit profit basis
- Price would fall
- Price of housing declines
- Cheaper rent
- Many people are able to build homes that they cannot maintain
- Many houses remain idle
- Deforestation, soil erosion, price inflation of inferior lumber
It is ____ to see any ultimate social advantage in unrestricted competition on a high production
difficult
