In the Mid-1990s, Cattle Ranchers in the United States Kept

question 216

Multiple Choice

In the mid-1990s, cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost.What is the likely explanation for this?

• A)Continuing to operate resulted in smaller losses than would have been incurred by shutting down.
• B)The ranchers were hoping to receive government subsidies.
• C)The exit costs were too high.
• D)Cattle is an important source of protein and its production is essential for the United States.

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the degree to which a company can increase profits by increasing sales.

Forecasting Errors

Discrepancies between predicted values and the actual outcomes that were not anticipated in statistical forecasts.

Contribution Margin

The difference between the sales revenue of a product and its variable costs.

Net Present Value

The disparity between cash inflows' present value and cash outflows' present value through a certain time frame, utilized to determine an investment's profitability.