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Descriptive Statements:
- Demonstrate knowledge of various agricultural products and services and the types and characteristics of large and small agricultural businesses (e.g., plant and animal production, retail and wholesale supply and service providers, Internet businesses).
- Demonstrate knowledge of types and characteristics of business ownership (e.g., sole proprietorship, S corporation, partnership) and other models of business organization (e.g., franchising, joint ventures, licensing).
- Demonstrate knowledge of management functions (e.g., planning, organizing, controlling) in agricultural businesses and characteristics of business leadership.
- Apply knowledge of the role and importance of entrepreneurship in agricultural businesses, characteristics of successful entrepreneurs, advantages and disadvantages of owning an agricultural business, and steps and strategies for starting an agricultural business.
- Demonstrate knowledge of strategies of risk management in agricultural businesses (e.g., diversification, hedging); principles of financial planning and management; basic banking procedures; and uses, sources, types, and costs of credit in agricultural businesses.
- Apply knowledge of principles and procedures of human resources management in agricultural businesses (e.g., hiring, evaluating, and terminating employees) and factors that influence individual and group behavior and employee motivation and morale.
- Demonstrate knowledge of laws and policies that affect various aspects of management of agricultural businesses (e.g., human resources, record keeping and reporting, business ownership).
Sample Item:
An entrepreneur would like to start a small business selling fresh berries, jams, and preserves from a small farm stand. Which of the following steps should the entrepreneur take first in starting this business?
- estimating potential revenues for the business
- developing a marketing strategy for the planned products
- calculating start-up costs for the business
- assessing local competition for the planned products
Correct Response and Explanation (Show Correct ResponseHide Correct Response)
D. The best initial step to starting a new business is to gain an understanding of the competitive landscape. The entrepreneur needs to assess whether there is enough demand in the local market to support the production of the berries, jams, and jellies at a sustainable price.
Descriptive Statements:
- Demonstrate knowledge of the marketing mix, marketing strategies (e.g., market segmentation), components of a marketing plan (e.g., product, price, promotion, placement), and strategies for developing a marketing plan (e.g., conducting market research, identifying target markets).
- Apply knowledge of steps in product development and factors affecting the development, commercialization, and sale of agricultural products (e.g., value-added principles, competitive landscape, product features, development and marketing costs).
- Apply knowledge of product pricing strategies in marketing agricultural products (e.g., penetration pricing, price skimming, premium pricing) and the difference between price and non-price-marketing strategies.
- Apply knowledge of promotional strategies in marketing agricultural products (e.g., advertising, sales promotion, use of loss leaders, direct marketing, social media).
- Demonstrate knowledge of strategies, issues, and trends in the marketing of agricultural products over the Internet (e.g., developing a Web site, listing on search engines, providing security).
- Demonstrate knowledge of strategies, issues, and trends in the global marketing of agricultural products (e.g., language barriers, differences in foreign and U.S. laws and policies).
- Apply knowledge of consumer behavior and motivation; customer relations; and steps, strategies, and issues in the selling of agricultural products.
- Demonstrate knowledge of laws and regulations relating to the marketing of agricultural products (e.g., laws related to consumer protection, product labeling, truth in advertising, price gouging, bait-and-switch promotion).
Sample Item:
Which of the following strategies best illustrates a loss-leader promotion?
- featuring several items in each category to be sold below the market's cost in the market's promotional activities
- offering store points to customers that accumulate with every purchase to be redeemed for other items
- promoting special sales during the slowest day of the week where everything in the store is marked down five percent
- providing a reduced-price table where items near the end of their shelf lives can be sold below the market's cost
Correct Response and Explanation (Show Correct ResponseHide Correct Response)
A. The loss-leader pricing strategy is used by businesses to attract customers by selling a product or service below cost.
Descriptive Statements:
- Demonstrate knowledge of basic economic principles (e.g., supply and demand, competition, opportunity cost) and their application to agricultural businesses.
- Demonstrate knowledge of types and characteristics of economic systems (e.g., command, traditional, market), market structures (e.g., monopoly, oligopoly), and factors that affect the operation of market economies (e.g., marketing, supply and demand, consumer choice, grants).
- Apply knowledge of factors that affect productivity in businesses involved in agricultural production (e.g., specialization, economies of scale, diminishing returns, innovation).
- Apply knowledge of macroeconomic factors that affect agricultural businesses (e.g., recession, employment levels, inflation) and the use of economic indicators (e.g., gross domestic product [GDP], consumer price index [CPI]) to assess these factors.
- Apply knowledge of how government tax, regulation, spending, and monetary and fiscal policies affect agricultural businesses, including tax credits.
- Demonstrate knowledge of how global factors (e.g., comparative advantage, supply chain issues, international competition, government policies) affect U.S. agriculture.
- Demonstrate knowledge of the importance of international trade for U.S. agriculture and factors that affect trade (e.g., tariffs, subsidies, exchange rates), including the roles that international agencies (e.g., World Bank, International Monetary Fund) and trade agreements (e.g., United States–Mexico–Canada Agreement) play in U.S. agriculture.
Sample Item:
Which of the following ways of maximizing productivity is governed by the principle of diminishing returns?
- optimizing the level of inputs
- minimizing per unit input costs
- optimizing specialization of outputs
- minimizing variation in output quality
Correct Response and Explanation (Show Correct ResponseHide Correct Response)
A. The principle of diminishing returns refers to a point where increasing the inputs to a production system will result in either less additional output or even a decrease in output. To maximize productivity, it is important to determine the point at which additional inputs no longer increase the business's overall productivity.
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