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Forest Finance > Module 3 > Flashcards

Module 3 Flashcards

1
Q

What are the 3 Kinds of values in Forestry?

A

Intangible, tangible, and values based from the method used or purpose

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2
Q

What are the 6 intangible values?

A

Sentimental, Artistic, Scenic, Recreation, Intrinsic, Scientific

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3
Q

What are the 5 tangible values?

A

Use, Scarcity, Monopoly, Luxury, Nuisance

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4
Q

What are the 10 values according to the method used?

A

Speculative, Liquidation, Salvage, Appraisal, Assessed, Cost, Capital, Realization, Replacement, Market values

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5
Q

It is the basis of most tangible values

A

Use

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6
Q

How is “use” measured?

A
  1. Profitability,

2. Different ways of using an article or piece of land

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7
Q

When is scarcity value high?

A

When a product is both 1) Useful and 2) Rare

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8
Q

An artificial scarcity value created by human control of a product or property

A

Monopoly Value

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9
Q

Expensive or rare articles irrespective of their utility

A

Luxury value

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10
Q

A piece of property must be used in such a way as to cause inconvenience or loss to another person

A

Nuisance value

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11
Q

Remaining value of a property after its usefulness for its original purpose is gone

A

Salvage value

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12
Q

Evaluation in monetary terms the exact amount of all types possessed by a piece of property

A

Appraisal value

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13
Q

Appraisal value must be always in terms of _____ because a property may have different uses and hence different values

A

Stated values

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14
Q

Set upon on property by a public official for taxation purposes based on the sale value of the asset

A

Assessed value

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15
Q

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

A

Cost value

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16
Q

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

A

Capital value

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17
Q

What are the four alternative terms for capital value?

A
  1. Discount value
  2. Present value
  3. Expectation value
  4. Soil expectation value
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18
Q

The difference between the values of raw materials and finished product

A

Realization value

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19
Q

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

A

Replacement value

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20
Q

Replacement value is equivalent to ___ if prices prevail at the time of destruction

A

Cost value

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21
Q

A modified form of cost value – one of the bases for appraising damages to forests

A

Replacement value

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22
Q

Standard values or prices that have been arrived

A

Market values

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23
Q

When should the buyer and seller agree upon the price of a property?

A

If there is no standard value upon selling

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24
Q

The resultant of the seller’s desire to sell and the buyer’s desire to buy the product

A

Selling Price

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25
Q

The seller sets a _____ he hopes to get and a ______ below which he will not sell

A

maximum, minimum

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26
Q

What does the price paid represent (2)?

A

1) Desire to sell by the seller

2) Desire to buy by the buyer

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27
Q

What are the 3 Parts of the Cost Curve?

A
  1. Total Cost (Fixed+Variable Costs)
  2. Average Cost
  3. Marginal Cost
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28
Q

Relationship between the amount of variable inputs used and the output produced

A

Production function

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29
Q

Production function is also called ____ or ____

A

factor-product or input-output relationship

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30
Q

What is the algebraic expression of the production function?

A

Y = f(Xi; X2,…,Xn)

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31
Q

The number of factors that are fixed and variable depends on _____?

A

The length of planning horizon (short-run or long-run)

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32
Q

What are the 3 forms of production function?

A
  1. Constant production function
  2. Diminishing production function
  3. Increasing production function
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33
Q

What do the 3 forms of production function consider (2)?

A

One variable:

  1. Input
  2. Output
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34
Q

What are the 2 other technical relationships of input and output?

A
  1. MPP (Marginal Physical Product)

2. APP (Average Physical Product)

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35
Q

What is the formula of MPP?

A 
MPPxi = Change in Y/Change in Xi
y = number of total products
Xi = variable input
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36
Q

What is the formula of APP?

A 
APPxi = Y/X
y = total product
x = amount of variable input used
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37
Q

What happens during stage I of the production function?

A

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

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38
Q

What happens during stage II of the production function?

A

APP and MPP is both decreasing
APP > MPP
In the end, MPP = 0

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39
Q

What happens during stage III of the production function?

A

Both APP and MPP are decreasing
APP > MPP
APP remains positive
MPP is negative

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40
Q

The additional or marginal income received from using an additional unit of input

A

MIC

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41
Q

What is the profit-maximizing level of input?

A

MVP = MIC or MFC

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42
Q

What is the formula of MVP?

A

MVP = Change in TVP/Change in the level of input

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43
Q

What is the formula of TVP?

A

TPP = TPP*Py

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44
Q

The formula of MVP using MPP?

A

MVP = MPP*Py

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45
Q

The change in total input cost or the

addition to total input cost due to an additional unit of input

A

MIC

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46
Q

What is the formula of MIC

A

MIC = Change in TIC/Change in the input levels

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47
Q

What is the formula of TIC?

A

TIC = X*Px

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48
Q

What is equal to MIC?

A

MIC = PX

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49
Q

In this condition, additional profit can be made by using more input

A

MVP > MIC

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50
Q

Compared by a record of time necessary to perform them

A

Efficiency of operations

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51
Q

What unit is used for the comparison of the efficiency of operations?

A

Man-time

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52
Q

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?

A

12 man-hour job and 1.5 man-day job

53
Q

This unit is partially valuable in comparing the efficiency of work under different wage scales

A

Time units

54
Q

This unit are also used for animal and

power transport

A

Time units

55
Q

The wage rate varies according to (2)?

A
  1. Time

2. Place

56
Q

Offer about the only possible
measure for real efficiency of certain
classes of operations

A

Time units

57
Q

The cost of making the same type of product varies according to (6)?

A
  1. Time
  2. Type of Plant
  3. Place
  4. Labor rates
  5. Quality of raw materials
  6. Distance of plant from raw materials
58
Q

Sometimes, as between competitive plants, cost ____ differ much in total but greatly in detail, sometimes, it is the ___.

A

may not, reverse

59
Q

What are the 3 ways of reducing cost and increasing profit?

A
  1. Mechanization
  2. Wage reduction
  3. Substitution of cheaper raw materials
60
Q

The limits of mechanization are set

by ___ and ____

A
  1. Progress and invention

2. Law of diminishing returns

61
Q

Can be reduced only so far, beyond which, worker will refuse to work or will work so badly that labor cost again increases

A

Wages

62
Q

Together with other factors, this fixes the price of raw materials.

A

Competition

63
Q

Substitution of cheaper raw materials
carried too far, ____ the selling price of
the final product

A

reduces

64
Q

More complete utilization of materials may increase cost because of ___ and ____

A
  1. Greater input of labor

2. Mechanical power necessary

65
Q

When is fixed cost only reducible (2)?

A
  1. Operations are profitable enough to pay for indebtedness

2. Financing at low interest rates

66
Q

What are the 3 usual kinds of prices?

A
  1. Mill
  2. Wholesale
  3. Retail
67
Q

Prices quoted in _____ are

usually wholesale or mill prices

A

statistics

68
Q

What are the 2 price variations?

A
  1. Short-term variation

2. Long-term variation

69
Q

Prices that are expressed in cash

A

Monetary prices

70
Q

Prices that are expressed in terms of purchasing power or gold

A

Real prices

71
Q

Since the value of money is constantly changing, it is desirable to change monetary prices to ____ or _____

A

real or adjusted

72
Q

What are the two ways of comparing prices?

A
  1. Monetary prices and real prices

2. Index or relative prices

73
Q

The price comparison that turns prices into percentages of a given price or the price at a given time

A

Index or relative price

74
Q

The price comparison that makes possible between price movements or different commodities measured in different units

A

Index or relative prices

75
Q

Sometimes both systems are used by making

____ to real prices

A

Indices

76
Q

Monetary prices may be converted to
real prices by coordinating them
either with (2)?

A
  1. Shifts in value of metallic units in which currency is based
  2. Purchasing value
77
Q

Currency is based on what?

A

value of metallic units

78
Q

Purchasing power is determined from an ___

A

all commodity index

79
Q

The purchasing power consists in either (2)?

A
  1. PPI

2. Commodity index itself

80
Q

It is the reciprocal of all commodity index

A

Purchasing Power Index

81
Q

How to use the purchasing power index?

A

Divide price by PPI

82
Q

How to use the commodity index?

A

Multiply price by CI

83
Q

Usually published by a govt agency that is

given the task to determine such prices

A

Index Prices

84
Q

Index prices are either ____ or _____ and have always a ____

A

Weighted or unweighted, base year

85
Q

How do we compare the price movements of commodities?

A

Use index price in the same base

86
Q

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

A

below, losses

87
Q

In the face of an increase in building activity, price goes ___ even though the previous price was well above his cost

A

up

88
Q

In this industry, goods cannot be sold continuously at less than cost.

A

Private industry

89
Q

The higher the cost of production, the ___ is being sold.

A

less product

90
Q

If costs rise but selling prices remain stationary, ____ would disappear.

A

Profits

91
Q

In the long run, prices tend to rise with ____ production costs and to decline with ____ ones.

A

increasing, decreasing

92
Q

Prices that are often unaffected by production cost

A

Short-run prices

93
Q

A producer whose costs are ____ can undersell his competitors and still make a profit

A

lower

94
Q

Between two or more producers at the same costs and one producer is satisfied with a ___ profit, he also can undersell his competitors

A

lower

95
Q

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

A

lowest

96
Q

In a time of lowest demand, prices are set by the ____ producers provided prices are _____ by the cost of production

A

lowest-cost, fixed

97
Q

In normal times prices are set by the ____ producers

A

average-cost

98
Q

In times of great demand, prices are set by the _____ operators

A

highest-cost

99
Q

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

A

gain or loss

100
Q

Prices of raw materials vary according to _____ and _____ situations

A

supply and demand

101
Q

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

A

increase, decrease

102
Q

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

A

substitutes, decrease

103
Q

Under competitive conditions, the _____ often has nothing to do with the current prices of finished products

A

total supply of raw materials

104
Q

Under stable economic conditions, prices remain ____ but economic conditions not long remain stable.

A

reasonably fixed

105
Q

What happens to prices in times of prosperity?

A

Generally increasing

106
Q

What happens to the purchasing power of money in times of prosperity?

A

lower

107
Q

What accompanies a period of prosperity (2)?

A
  1. Credit inflation

2. Wild speculation

108
Q

What happens to paper values during times of prosperity?

A

Destroyed

109
Q

What happens to employment during times of prosperity?

A

Decreased

110
Q

In times of prosperity, demand for

goods are ____ since ___ prices already reduced the demand for these goods.

A

lower, high

111
Q

Prices then would _____ and finally to a point where price structure would ____

A

slump to low levels, break down

112
Q

What must be done to the price structure during depression periods?

A

Painfully built up again

113
Q

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 _______.

A

rise and fall, fluctuations, affected

114
Q

Who has many powers of price control?

A

Government

115
Q

In times of war, emergency, or in other exceptional circumstances, prices may ___ or at least state a ____ and above that it may not go.

A

become fixed, maximum

116
Q

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.

A

increase

117
Q

What is the formula for profit?

A

Profit = Total Revenue = Total Cost

118
Q

Government, as a large ____ and ____ of goods and services, ____prices in the same manner as other large producers and consumers

A

buyer and seller, influence

119
Q

In regulating some prices, the _____ affects others, and thus affects the _____.

A

government, price structure

120
Q

The government tends to keep prices ____ at the benefit of the _____ rather than ___, and in general to ____ the extremes of the business cycle.

A

lower, consumers, producers, equalize

121
Q

A business is making a profit over and above its _____

A

operational cost

122
Q

A business may make an operating profit but

_____ of it has a heavy debt load

A

net profit

123
Q

The operating profit is usually figured in terms of ______, sometimes for ____ or ____ periods, and sometimes for the _____

A

yearly operations, short or long, life of the entire operation

124
Q

Total profit in a lumber operation ____ be

determined until it is concluded, perhaps ____ after it is started

A

cannot, 25 years

125
Q

What are the two common strategies to maximize profit?

A
  1. Restrict expansion of operations and increase prices

2. Continue expanding and lower prices

126
Q

Strategy #2 demands greater ____, ____, and ___ . Competition becomes ____ and will force them ____.

A

capital skills, managerial skills and business risk

127
Q

If the largest number of businesses takes strategy #1, prices will be maintained at ____

A

high levels

128
Q

Explain the chain of events when all lumber mills decide on a high-production low unit profit basis

A
  1. Price would fall
  2. Price of housing declines
  3. Cheaper rent
  4. Many people are able to build homes that they cannot maintain
  5. Many houses remain idle
  6. Deforestation, soil erosion, price inflation of inferior lumber
129
Q

It is ____ to see any ultimate social advantage in unrestricted competition on a high production

A

difficult

Forest Finance (6 decks)

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