Question

1.) Given the information below about Farmer Sally’s wheat crop, fill in the table below and calculate her economic profit or loss when the market price is $3 per bushel. Hint: Recall that         MR = P under perfectly competitive conditions.

Bushels of wheat	MR	TR	TC	MC	VC	ATC	AVC	Economic Profit or Loss
0			15.00	--	0	--	--
1				4.75
2				3.75
3				3.00
4				2.50
5				2.00
6				1.50
7				1.25
8				1.50
9				2.00
10				2.75
11				3.25
12				4.75
13				6.50
14				9.50
15				13.50
16				18.50

1. Graph Total Cost and Total Revenue on one graph and show the optimal point (either profit maximization or loss minimization).
2. Graph MC, ATC, AVC, and MR on one graph and show the optimal point (either profit maximization or loss minimization). Shade in the area of profit or loss.
3. If the price increased to $5 per bushel, what would be the economic profit or loss? How many bushels of wheat would Sally choose to produce?
4. What is Sally’s shutdown point? Answer this question in terms of both a minimum price that she would have to get in order to produce and a minimum quantity that she would be willing to make at the minimum price.

Answer 1