ARE 132 Midterm (clicker questions)

Cooperatives are firms with the same structure corporations. A)True B)False

A)True

Cooperatives face a horizon problem. A)True B)False

A)True

Cooperatives face a portfolio problem. A)True B)False

A)True

It is essential to attract as many potential members as possible. A)True B)False

A)True

Cooperatives face a principal agent problem. A)True B)False

A)True (BOD is the problem)

In cooperatives, a significant portion of capital must come from membership. A)True B)False

A)True (overall, not initial membership fee)

What specific benefits can cooperatives provide? A.Share information and provide education B.Reward entrepreneurial activity C. Flexibility in decision making D.All of the above

A.Share information and provide education

Which of the following is NOT a characteristic of worker co‐ops? A)Non‐profit enterprise B)Owned & managed by their workers C)Primary purpose is to provide employment with fair wages to their member‐employees D)Have a "1 member‐1 vote" governance structure E)All of the above are characteristics of worker co‐ops

A: non profit enterprise

All of these objectives will change the outcome as compared to the IOF outcome discussed. A)True B)False

B)False

Cooperatives should always offer low priced shares. A)True B)False

B)False

Members establish or decide on the objectives. A)True B)False

B)False (BOD)

Which of the following is a common source of unallocated equity for a supply cooperative? A)Income from sales to members of the cooperative B)Income from sales to non‐members C)Sales of preferred stock D)All of the above

B)Income from sales to non‐members

What is the fundamental difference between Sapiro and Nourse with respect to their views on co‐operatives? A)The optimal size of a co‐operative B)The role of co‐operatives related to market power C)The voting structure D)None of the above; their views on cooperatives were very similar

B)The role of co‐operatives related to market power

Which identified problems constrain the management of Co‐ops ? A.Horizon Problem B.Principal Agent Problem C.Portfolio Problem D.Both A and C E.All of the above

B.Principal Agent Problem

My food purchasing choices have which of the following effects on the agricultural sector? A.Support the agricultural sector overall B.Support primarily the local food economy C.Support sustainable production practices D.Support cooperative business structures E.I don't know

B.Support primarily the local food economy

According to Zeuli and Cropp, which of the following have contributed the most to the development of farmer cooperatives in the U.S.? A.Benjamin Franklin B.The American Farm Bureau and the National Farmer's Union C.The first formed Grange D.The Farmer's Alliance and American Society of Equity

B.The American Farm Bureau and the National Farmer's Union

Which of the following is NOT an example of vertical integration? A)Cattle producers investing together in a meat processing facility B)An apple farmer making applesauce and pies from some of his apples and selling them at a Harvest Fair C)A peach farmer planting a new variety of peaches D)A cooperative grocery purchasing its own orchard E)All of the above are examples of vertical integration

C)A peach farmer planting a new variety of peaches

Which of the following is not a potential structural problem that agricultural marketing cooperatives face? A)Principal Agent Problem B)Horizon Problem C)Moral Hazard Problem D)Portfolio Problem

C)Moral Hazard Problem (moral hazard occurs when someone increases their exposure to risk when insured, especially when a person takes more risks because someone else bears the cost of those risks. )

Which of the introduced problems explains underinvestment in cooperatives? A)Principal agent problem B)Horizon problem C)Portfolio problem D)Free rider problem

D)Free rider problem

Which identified problems constrain the ability to raise additional capital from its members? A.Horizon Problem B.Principal Agent Problem C.Portfolio Problem D.Both A and C E.All of the above

D.Both A and C (Horizon Problem & Portfolio Problem)

If the Davis Food Co‐op's General Manager entered an agreement to allow one dairy producer to be the only supplier of dairy products to the co‐op, which of the International Co‐operative Alliance's seven principles would this conflict with? A)Democratic Member Control B)Voluntary and Open Membership C)Autonomy and Independence D)All of the above E)Both A) & C)

E)Both A) & C)

Under what circumstance(s) might we expect cooperatives to exist? A)perfect competition B)spatially dispersed markets C)highly perishable products D)Both A) and C) E)Both B) & C)

E)Both B) & C)

What are important implications of the equity structure and rules for how members can benefit from an increase in the value of the cooperative overall?

Equity structure: revolving fund plan & base capital plan. If the coop increases in value overall they can only benefit if the coop is sold b/c their equity share is higher.

T/F: Cooperatives can solve most economic problems and are the best choice for every business situation.

False

T/F: Federal regulation was also supportive of cooperatives.

False

T/F: Most of these early cooperatives are still in existence today

False

T/F: People who organize and belong to cooperatives do so for economic reasons only

False

T/F: These New Generations Cooperatives (NGCs) retain all of the characteristics of traditional Cooperatives.

False

A local supply cooperative conducts a survey of its patrons and discovers that they ignore cooperative patronage refunds when making purchase decisions. How does it affect the cooperative's ability to achieve specific objectives through pricing policies? What happens when patrons consider net prices instead?

If patrons are ignoring patron refunds, then coop will operate at break even. If patrons do consider net prices (patronage) then coop operates at minATC.

What is the economic rationale for creating a co‐op?

To address market failure and missing markets

A cooperative identity can be used as....

a marketing strategy

Which sector has seen billions of dollars in investment in the last 2 decades?

fair supply and grain marketing coops

T/F:So called hybrids blend elements of mutual‐benefit companies and investororiented firms and are now dominating the cooperative sector.

false...rare in US compared to traditional coops

Which of the Challenges discussed do Food Co‐ops face?

.....

Can you think of examples of worker owned businesses?

......

Why is There a Need for Professional Management?

.....?

T/F: Cooperatives are private, and investorowned organizations.

True

T/F: The coop principle "service at a cost" while sounding reasonable, has problems if taken literally

True

T/F:Food Co‐ops were instrumental in now well defined food trends.

True

What is the Key Challenge that Drives the Restructuring?

.....