3. Profit maximization using total cost and total revenue curves Suppose Cho runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt. The following graph shows Cho's total cost curve. Lise the blue points (aircle symbol) to plat total revenue and the green points (triangle symbal) to plot profit for shirts quantities zero through seven (inclusive) that Cho produces. 200 175 Total Revenue 190 Total Cost 125 Prott 100 75 25 25 QUANTITY (Sins) Cakculate Cho's marginal revenue and marginal cost for the first seven shirts she produces, and plot them on the following graph. Use the blue points (circde symbol) to piot marginal revenue and the orange points (square symbal) to plot marginal cost at each quantity. Marginal Reverue Marginal Cost 1. QUANTITY (Ss) Cho's profit is maximized when she produces shirts. When she does this, the marginal cost of the last shirt she produces is which is - than the price Cho recelves for each shirt she sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize her profit) is s . which is v than the price Cho receives for each shirt she sells. Therefore, Cho's profit-maximizing quantity corresponds to the intersection of the curves. Because Cho is a price taker, this last condition can also be written as RRR CUSIS ANU VENUE oears per snt (seon) anwaAH ISnn ni
3. Profit maximization using total cost and total revenue curves Suppose Cho runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt. The following graph shows Cho's total cost curve. Lise the blue points (aircle symbol) to plat total revenue and the green points (triangle symbal) to plot profit for shirts quantities zero through seven (inclusive) that Cho produces. 200 175 Total Revenue 190 Total Cost 125 Prott 100 75 25 25 QUANTITY (Sins) Cakculate Cho's marginal revenue and marginal cost for the first seven shirts she produces, and plot them on the following graph. Use the blue points (circde symbol) to piot marginal revenue and the orange points (square symbal) to plot marginal cost at each quantity. Marginal Reverue Marginal Cost 1. QUANTITY (Ss) Cho's profit is maximized when she produces shirts. When she does this, the marginal cost of the last shirt she produces is which is - than the price Cho recelves for each shirt she sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize her profit) is s . which is v than the price Cho receives for each shirt she sells. Therefore, Cho's profit-maximizing quantity corresponds to the intersection of the curves. Because Cho is a price taker, this last condition can also be written as RRR CUSIS ANU VENUE oears per snt (seon) anwaAH ISnn ni
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
3. Profit maximization using total cost and total revenue curves
Suppose Cho runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt.
The following graph shows Cho's total cost curve.
Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven (inclusive) that Cho produces.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education