ICAR AICE-JRF/SRF Cooperatives & Farmer Producer Organisations: practice questions

1 · Principles of cooperation · hard

Older members of a dairy cooperative vote against a plant expansion that will pay off in fifteen years, preferring higher milk prices now, because their claim on the cooperative ends when they stop supplying. In Cook's (1995) terms this is the:

1. Portfolio problem
2. Free-rider problem
3. Influence-cost problem
4. Horizon problem

2 · Principles of cooperation · medium

Dutch horticultural cooperatives are known for selling through the clock auction. In this auction the price:

1. Is set by sealed bids opened at the end of the day
2. Starts high and falls until the first buyer stops the clock
3. Starts low and rises as buyers bid openly
4. Is fixed in advance by the cooperative board

3 · The cooperative movement and the state · hard

Kenya rewrote its cooperative law in 1997 to cut state control, then amended it in 2004 after mismanagement appeared in some societies. What does this sequence most often illustrate?

1. That cooperatives perform best when run directly by a government department
2. That liberalisation always fails and should be reversed in full
3. That autonomy without member oversight and audit can let mismanagement grow
4. That deposit-taking cooperatives need no prudential rules once law is liberal

4 · Single-window input supply and output marketing · hard

A village credit cooperative extends into fertiliser retail, grain storage and procurement. Which risk is most specific to this single-window expansion?

1. Loss of voting rights by members
2. Losses in trading lines draining funds needed for credit, because working capital is shared
3. Higher refinance rates from the development bank for multipurpose societies, which lose their concessional status
4. Automatic loss of cooperative registration

5 · Formation of producer organisations and producer companies · medium

Several countries have created hybrid legal forms for farmer businesses. Which description fits a producer company?

1. A cooperative society under state cooperative law with unlimited member liability
2. A listed company in which farmers hold a minority of the tradable shares
3. A company owned only by producers, with limited return on capital and patronage bonus
4. A government corporation that buys produce from registered farmers

6 · Formation of producer organisations and producer companies · hard

Dutch law lets a cooperative choose the liability of its members on dissolution. A 'UA' cooperative is one in which:

1. Members' liability is unlimited, as in early Raiffeisen societies
2. Members' liability for the cooperative's debts is excluded
3. Members are liable up to a fixed amount set in the articles
4. Only directors, not members, are liable for any shortfall

7 · Public programmes to promote producer organisations: membership, management cost support, equity grants and credit guarantees · hard

A critic argues that the equity grant design favours FPOs that are already well-off. Which feature of the grant supports that argument?

1. It is paid only to organisations in disadvantaged districts
2. It is fixed at 1,500,000 currency units for every organisation
3. It is a matching grant, so organisations whose members can contribute more equity receive more grant
4. It is given as a loan repayable in five years

8 · Collective farming · medium

China's household responsibility system from about 1978 is often cited in the collective farming literature because it:

1. Collectivised private land for the first time
2. Created the people's communes
3. Returned land use and residual income to households and was followed by rapid output growth
4. Abolished all state procurement at once

9 · Collective farming · hard

Which reason is most consistently given in the literature for the poor performance of compulsory collective farms?

1. Members were paid too much in cash
2. Weak individual incentives, because effort and reward are only loosely linked and monitoring is costly
3. Collective farms had too little land
4. Collective farms were banned from using machinery

10 · Formation of producer organisations and producer companies · hard

Compared with a cooperative, which feature of a producer company makes it potentially more attractive to lenders?

1. Its directors bear unlimited liability
2. It is exempt from audit
3. Its shares can be pledged and sold on a stock exchange
4. It is governed by uniform company law with standard filings and less scope for registrar interference