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Effects of Supply Variations on Costs and Profits of Slaughter Plants
Author(s) -
Daellenbach Lawrence A.,
Fletcher Lehman B.
Publication year - 1971
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1237823
Subject(s) - raw material , economics , product (mathematics) , certainty , microeconomics , business , industrial organization , natural resource economics , mathematics , ecology , geometry , biology
Preferences of the firm for stable or varying flows of raw products are considered. A decision model involving rate and hours of plant operation is developed to measure the, impact of supply variations on plant costs and profits. Situations in which the firm can and cannot predict raw material receipts with certainty are simulated. Varying supplies were found to raise costs of slaughter, but plants with stable supplies lose profits as long as product and input prices vary. Therefore individual firms, especially those that can forecast with a high degree of success, are unlikely to prefer stable to varying supplies.