Microeconomics

Quantitative Literacy Assignment – Cost.

NAME_______________________________________ ID (abc123) ____________________

Part I. Compute the values for the blank cells.

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

Q * (Fields)	Market Price Per Ton	TR	MR Per Ton	FC	VC	TC	$ 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, and

MC. (You can also use an EXCEL graph or plot on a separate graph

paper and STAPLE it to this assignment). Use titles on graph, axes, and

variables.

Part III. Individual Writing Questions. Answer the following questions in a few well-written sentences. 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 Korn & Sons

Company.

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