Theory question 110
Basic Agricultural Economics(a)(i) State the law of diminishing returns. (ii) Explain the main cause of diminishing returns in agricultural production.
(b) A commercial farmer bought a second hand combine harvester for ₦100,000.00 in 1990, and sold it for ₦30,000.00 in 2000. For the combine harvester, calculate the (i) salvage value; (ii) total depreciation; (iii) annual depreciation.
(c) List seven problems of agricultural extension services in West Africa.
Show the model answer
(a)(i) When more and more units of a variable input are added to a fixed input, the extra output from each additional unit eventually begins to fall.
(ii) Some factor (e.g. land) is fixed, so each extra unit of the variable factor has less of the fixed factor to work with.
(b)(i) Salvage value = selling price at end of use = ₦30,000.00.
(ii) Total depreciation = ₦100,000 − ₦30,000 = ₦70,000.00.
(iii) Annual depreciation = ₦70,000 ÷ 10 years (1990–2000) = ₦7,000.00 per year.
(c) Any seven: too few extension workers; poor transport/mobility; illiteracy of farmers; poor funding; inadequate teaching aids; poor remuneration of agents; language barriers; farmers' conservatism; poor research–extension linkage; lack of credit and inputs to apply new methods.
Show the working in (b): cost minus salvage value, then divide by the years of use.