If a farmer obtains a "non-recourse" loan from the government, how is the loan repaid if crop production does not generate enough revenue?

A non-recourse loan means that the borrower is not personally liable if they're unable to repay the loan. In the context of agriculture, this implies that if the farmer cannot generate enough revenue from crop production to repay the loan, the terms dictate how the loan is settled without further financial penalties to the farmer.

In this case, the correct approach is that the farmer can forfeit the crop produced as a form of repayment. This means that instead of the farmer having to reimburse the loan with cash, the government will accept the harvested crops as collateral. Essentially, the loan is secured against the value of the crop rather than the farmer's personal or other assets. This protects the farmer from debt liability beyond the agreed collateral.

The other options do not accurately reflect the nature of non-recourse loans. Forgiving the entire loan would indicate a loss for the government without compensation, which contradicts the principle of a secured loan. Taking possession of other farm assets or requiring another loan would also defeat the purpose of a non-recourse arrangement, which aims to limit the financial risk to only the specific collateral (in this case, the crop). Therefore, the option regarding taking possession of the crop is aligned with the core characteristics of a non-recourse loan.