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

RATIONAL BEHAVIOUR : Rational behavior is a process that is used when making multiple-choice decisions to evaluate the profit earned from a specific utility. In addition, rational behavior is approached by most businesses to prevent them from trading at a loss.

EXPLANATION : According to economics, profit maximization is a pricing process that is used by organizations to obtain the price of a commodity by considering the production cost to achieve a higher profit after sale. The economic factors influencing such behavior are capital, labor and land. If the land available to produce calves is minimal, its behavior can happen because in the future there will be a lack of sufficient farm to feed the calves and they will be their owners. Will lose. In addition, the lack of sufficient capital to protect the health of calves may result in the lack of sufficient funds to bring them into the market for trade. Less effort to control calves may lead to slaughter and burial. Is so that cows grown in a manageable manner do not require much labor.

Slaughtering the calves and then burying them can be said to be rational behavior by the rankers in the context when they want to save their business.

When businesses are unable to recover their variable costs or their value reaches or exceeds the minimum level of AVC, they are not able to continue production because they also have to pay fixed costs. Only its value will be at least AVC, the ranchers will cut off the calves completely and stop their production.

They will wait for the price to rise again after the supply is deficient. According to this , When the price increases, the watchman stops purchasing and starts selling. So this behavior can be rational given the reasoning given.