In microeconomics

Quantitative Literacy Assignment 2 – Cost

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Part I. Compute the values for the blank cells.

Henry Corn & Sons, Inc. – A Perfectly Competitive Firm in the Short Run

Q *

(Fields)

Market Price

Per Ton

Total

Revenue

MR Per

Ton

Total Fixed

Cost

Total

Variable

Cost

Total

Cost

$ Profit or

loss

AFC Per

Ton

AVC Per

Ton

ATC Per

Ton

MC Per

Ton

0 $40.00 $ 0

1 $40.00 24,000 $59,000

2 $40.00 40,000

3 $40.00 60,000

4 $40.00 85,000

5 $40.00 $156,000

6 $40.00 169,000

7 $40.00 221,000

8 $40.00 286,000

* Experience indicates that their yield is 1,000 tons per field. Therefore, for all per ton computations, use thousands for Q in the formulas, e.g.

1,000, 2,000 etc. tons, instead of 1,2 etc. fields.

Part II. On the grid at the right – PLOT the per ton: Price, MR, AVC, ATC, AFC and MC...

Use titles on graph, axes, and variables.

Part III. Individual Writing Questions: Answer the following questions in a few well-written sentences (25-50 Words Each).

Support your answers with data.

1. How many fields should Henry & Sons plant this spring to maximize profits, and what determines this?

2. Should they try to get a price higher than $40 per ton to improve profits? Why, or why not?

3. Assume the price is $40 per ton, should they consider closing down? Why, or why not?

4. Explain which of the variables computed in the table and plotted on the graph represent the supply and demand curves for the Henry Corn & Sons Company.

5. Explain what the supply and demand curves indicate to the Henry Corn firm.