Question

News reports from the western United States occasionally report incidents of cattle ranchers slaughtering many newborn calves and burying them in mass graves rather than transporting them to markets. Assuming that this is rational behavior by profit-maximizing "firms," explain what economic factors may influence such behavior. Justify your answer.

Answer 1

The company maximizes profit by producing an output in line with the MR = MC. Ranchers raise calves for the purpose of wool and meat. Such farmers slaughter and burn newborn calves instead of selling them on the market. The rational conduct of the producer may be based on two reasons for the news that has been reported in the newspaper:

• The ranchers are keen to deliberately preserve the meat price. Then if the supply was likely to increase every season, they would only be burying newborn calves in mass graves, rather than raising them. The growth of these animals has costs and it is wise to kill them if one don't achieve the desired income or benefit.
• A decrease in meat demand may occur periodically and a higher stock can be costly due to lower demand and therefore revenue. Thus they slaughter newbies and bury them in mass graves in order to keep the income in place.

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