Suppose the market for beef cattle was initially in equilibrium. An increase in the price of the fodder used to feed cattle would cause _____

Question

Quizplus · Accepted Answer

An increase in the price of fodder would increase the cost of production for cattle farmers and reduce their profit margins. As a result, some of them may exit the market or reduce their output, leading to a decrease in the supply of beef cattle in the long run. This would cause the price of beef to increase as the market adjusts to the new equilibrium. In the short run, the price of beef may not change much as farmers may try to absorb some of the increase in fodder prices by reducing their profit margins. Therefore, option B is the most accurate statement.

Suppose the Market for Beef Cattle Was Initially in Equilibrium