Preferences Have Just Shifted Away from Beef and into Mutton

question 31

Multiple Choice

Preferences have just shifted away from beef and into mutton. If you are a sheep rancher, the best profit-maximizing strategy is to

• A) shut down.
• B) produce as much as possible to earn profits in the short run.
• C) shift some of your ranching capacity into cattle raising.
• D) cut prices to increase market share.

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Definitions:

Annuity

An annuity is a financial instrument that provides a consistent series of payments to a person, often serving as a source of income for people in retirement.

Present Value Index

A calculation that compares the present value of net cash inflows to the initial investment, used to evaluate the profitability of an investment.

Computed

Refers to something that has been determined or calculated using a computer or calculator.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project, calculated by discounting the expected future cash flows to their present values and subtracting the initial investment.