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3. Profit maximization using total cost and total revenue curves Suppose Jayden operates a handicraft pop-up retail shop that sells rompers. Assume a perfectly competitive market structure for rompers with a market price equal to $20 per romper. The following graph shows Jayden's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for rompers for quantities zero through seven (including zero and seven) that Jayden produces. 200 175 150 125 100 TOTAL COST AND REVENUE (Dollars) 75 50 25 25 ח ☐ -25 0 1 2 ☐ ☐ ? Total Revenue Total Cost Profit 5 6 7 8 3 4 QUANTITY (Rompers) Calculate Jayden's marginal revenue and marginal cost for the first seven rompers they produce, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity. COSTS AND REVENUE (Dollars per romper) 40 35 30 25 20 20 15 10 G 0 0 1 2 3 4 5 6 7 8 QUANTITY (Rompers) Marginal Revenue Marginal Cost (?) $ Jayden's profit is maximized when they produce a total of an amount rompers. At this quantity, the marginal cost of the final romper they produce is than the price received for each romper they sell. At this point, the marginal cost of producing one more romper (the first romper beyond the profit maximizing quantity) is $ , an amount than the price received for each romper they sell. Therefore, Jayden's profit-maximizing quantity occurs at the point of intersection between the Because Jayden is a price taker, the previous condition is equivalent to curves.

3. Profit maximization using total cost and total revenue curves Suppose Jayden operates a handicraft pop-up retail shop that sells rompers. Assume a perfectly competitive market structure for rompers with a market price equal to $20 per romper. The following graph shows Jayden's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for rompers for quantities zero through seven (including zero and seven) that Jayden produces. 200 175 150 125 100 TOTAL COST AND REVENUE (Dollars) 75 50 25 25 ח ☐ -25 0 1 2 ☐ ☐ ? Total Revenue Total Cost Profit 5 6 7 8 3 4 QUANTITY (Rompers) Calculate Jayden's marginal revenue and marginal cost for the first seven rompers they produce, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity. COSTS AND REVENUE (Dollars per romper) 40 35 30 25 20 20 15 10 G 0 0 1 2 3 4 5 6 7 8 QUANTITY (Rompers) Marginal Revenue Marginal Cost (?) $ Jayden's profit is maximized when they produce a total of an amount rompers. At this quantity, the marginal cost of the final romper they produce is than the price received for each romper they sell. At this point, the marginal cost of producing one more romper (the first romper beyond the profit maximizing quantity) is $ , an amount than the price received for each romper they sell. Therefore, Jayden's profit-maximizing quantity occurs at the point of intersection between the Because Jayden is a price taker, the previous condition is equivalent to curves.

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter8: Perfect Competition
Section: Chapter Questions
Problem 20RQ: What two lines on a cost curve diagram intersect at the zero-profit point?
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3. Profit maximization using total cost and total revenue curves Suppose Jayden operates a handicraft pop-up retail shop that sells rompers. Assume a perfectly competitive market structure for rompers with a market price equal to $20 per romper. The following graph shows Jayden's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for rompers for quantities zero through seven (including zero and seven) that Jayden produces. 200 175 150 125 100 TOTAL COST AND REVENUE (Dollars) 75 50 25 25 ח ☐ -25 0 1 2 ☐ ☐ ? Total Revenue Total Cost Profit 5 6 7 8 3 4 QUANTITY (Rompers)
Transcribed Image Text:3. Profit maximization using total cost and total revenue curves Suppose Jayden operates a handicraft pop-up retail shop that sells rompers. Assume a perfectly competitive market structure for rompers with a market price equal to $20 per romper. The following graph shows Jayden's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for rompers for quantities zero through seven (including zero and seven) that Jayden produces. 200 175 150 125 100 TOTAL COST AND REVENUE (Dollars) 75 50 25 25 ח ☐ -25 0 1 2 ☐ ☐ ? Total Revenue Total Cost Profit 5 6 7 8 3 4 QUANTITY (Rompers)
Calculate Jayden's marginal revenue and marginal cost for the first seven rompers they produce, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity. COSTS AND REVENUE (Dollars per romper) 40 35 30 25 20 20 15 10 G 0 0 1 2 3 4 5 6 7 8 QUANTITY (Rompers) Marginal Revenue Marginal Cost (?) $ Jayden's profit is maximized when they produce a total of an amount rompers. At this quantity, the marginal cost of the final romper they produce is than the price received for each romper they sell. At this point, the marginal cost of producing one more romper (the first romper beyond the profit maximizing quantity) is $ , an amount than the price received for each romper they sell. Therefore, Jayden's profit-maximizing quantity occurs at the point of intersection between the Because Jayden is a price taker, the previous condition is equivalent to curves.
Transcribed Image Text:Calculate Jayden's marginal revenue and marginal cost for the first seven rompers they produce, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity. COSTS AND REVENUE (Dollars per romper) 40 35 30 25 20 20 15 10 G 0 0 1 2 3 4 5 6 7 8 QUANTITY (Rompers) Marginal Revenue Marginal Cost (?) $ Jayden's profit is maximized when they produce a total of an amount rompers. At this quantity, the marginal cost of the final romper they produce is than the price received for each romper they sell. At this point, the marginal cost of producing one more romper (the first romper beyond the profit maximizing quantity) is $ , an amount than the price received for each romper they sell. Therefore, Jayden's profit-maximizing quantity occurs at the point of intersection between the Because Jayden is a price taker, the previous condition is equivalent to curves.
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