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Buffaloes Bill the Taxpayer

SCENERIO : Buffaloes Bill the Taxpayer
Back home on the range, a funny thing is happening to the beef cattle and buffalo businesses.
A. The news for cattle ranchers is not good.
· The national cattle herd has been in decline for the past twenty years.
· Per capita consumption of beef is down 20 percent in the same period.
· Producers' costs go up while beef prices go down.
· Kids that grew up on cattle ranches are leaving them in droves.
B. The buffalo business, on the other hand, is chipping along.
· Chi-chi gourmands and the fat-avoiders are driving demand skyward and along with it, prices.
· While a healthy cow and her calf sell for $600-800, a pregnant buffalo heifer sells for $3000-5000.
· Some 20,000 buffalo are slaughtered annually. About 135,000 cattle are butchered every day.
There are problems with the buffalo producers though.
They produce fewer pounds of choice meat per carcass. More than a third of the animal is ground up into buffalo burger, meat too lean to make good patties. Hence, there is a huge surplus of ground buffalo. In May 1999, the Department of Agriculture announced it would buy 25 percent of the industry's ground-meat production and give it to federal nutrition programs. They will pay $3.45 per pound, more than twice as much as it pays for beef.

Sources: John A. Baden, "Taxpayers Get Buffaloed," The Wall Street Journal, June 24, 1999, p. A22, and Mindy Sink, "Judge Puts Hold on Grazing," New York Times," June 1, 2002, p. 11.

IN 150-200 WORDS, ANSWER THE QUESTIONS BELOW (the total word count for the 5 questions)

1 Name an example of the invisible hand at work from the case.
2. Who would be better able to analyze this market, a microeconomist or a macroeconomist?
3. How would you describe the opportunity cost for cattle ranchers?
4. Is this an example of positive or normative economics?
5. Name a social, political, and economic force from the case.

Solution Preview

1 Name an example of the invisible hand at work from the case.

We can see the effect of the invisible hand in that as the demand for cattle decreases, a series of restructuring events take place, including the shrinking of the industry. As the demand for buffalo increases, the industry grows. Furthermore, prices reflect the changes in demand; the market clears.

2. Who would be better ...

Solution Summary

Answers the following:

SCENERIO : Buffaloes Bill the Taxpayer
Back home on the range, a funny thing is happening to the beef cattle and buffalo businesses.
A. The news for cattle ranchers is not good.
· The national cattle herd has been in decline for the past twenty years.
· Per capita consumption of beef is down 20 percent in the same period.
· Producers' costs go up while beef prices go down.
· Kids that grew up on cattle ranches are leaving them in droves.
B. The buffalo business, on the other hand, is chipping along.
· Chi-chi gourmands and the fat-avoiders are driving demand skyward and along with it, prices.
· While a healthy cow and her calf sell for $600-800, a pregnant buffalo heifer sells for $3000-5000.
· Some 20,000 buffalo are slaughtered annually. About 135,000 cattle are butchered every day.
There are problems with the buffalo producers though.
They produce fewer pounds of choice meat per carcass. More than a third of the animal is ground up into buffalo burger, meat too lean to make good patties. Hence, there is a huge surplus of ground buffalo. In May 1999, the Department of Agriculture announced it would buy 25 percent of the industry's ground-meat production and give it to federal nutrition programs. They will pay $3.45 per pound, more than twice as much as it pays for beef.

Sources: John A. Baden, "Taxpayers Get Buffaloed," The Wall Street Journal, June 24, 1999, p. A22, and Mindy Sink, "Judge Puts Hold on Grazing," New York Times," June 1, 2002, p. 11.

IN 150-200 WORDS, ANSWER THE QUESTIONS BELOW (the total word count for the 5 questions)

1 Name an example of the invisible hand at work from the case.
2. Who would be better able to analyze this market, a microeconomist or a macroeconomist?
3. How would you describe the opportunity cost for cattle ranchers?
4. Is this an example of positive or normative economics?
5. Name a social, political, and economic force from the case.

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