Question of the day

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CFAHouston

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04/06/2006

Question:
If the market for beef cattle is initially in equilibrium, a decrease in the price of the feed grains used to fatten cattle would cause:

a) the supply of beef cattle to decline, driving beef prices upward in the long run.
b) the supply of beef cattle to increase, placing downward pressure on beef prices in the long run.
c) both supply and demand of beef cattle to rise, leaving price virtually unchanged.
d) the demand for beef cattle to increase, driving prices upward.
 
I think B. It causes the "cost" of cattle to decrease, which should increase supply.
 
the price of feed grains goes down, therefore the price of cattle goes down. when the prices are down, farmers must be less willing to sell their cattle which pushes down the supply. when the supply is decreases, prices start going up. Hence, I would go with A.

What kind of idiot cowboy makes up these gay questions anyway? Arh... :-(
 
first...cow girl...

Got these from Allenresources.com test of the day. Just trying to share with people who might find it useful to have a question....



Edited 2 time(s). Last edit at Thursday, April 6, 2006 at 05:25PM by CFAHouston.
 
My vote is for B as well. The cheaper the input (grain), the higher the output (cattle) there will be. (Supply up, beef prices down).
 
It's B. This is a question about inputs. The price of an input going down means that all things equal the price of the product will decrease or more specifically the MC will decrease and quantity of each firm will increase. This will cause the overall supply to increase of the economy and shift the supply curve to the right, changing the equilibrium point (increasing Q and Decreasing P)
 
I vote B.....price of feed can only affect supply of cattle beef
 
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