3. Profit maximization using total cost and total revenue curvesSuppose Kenji runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20per shirt.The following graph shows Kenji'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 Kenji produces.200175Total Revenue150Total Cost125Profit100-2512.TOTAL COST AND REVENUE (Dollars) (circie symboI) to plot marginal revenue and the orange points (square symbol) to piot marginal cost at each quantity.4035Marginal RevenueMarginal Cost234678QUANTITY (Shirts)Kenji's profit is maximized when he producesshirts. When he does this, the marginal cost of the last shirt he produces is $which isthan the price Kenji receives for each shirt he sells. The marginal cost of producing an additional shirt (that is, one more shirt thanwould maximize his profit) is $, which isthan the price Kenji receives for each shirt he sells. Therefore, Kenji's profit-maximizingquantity corresponds to the intersection of thecurves. Because Kenji is a price taker, this last conditioncan also be written asCOSTS AND REVENUE (Dollars per shirt)

Profits are the excess of revenue receipts over the costs incurred by the firm. When the marginal…

3. Profit maximization using total cost and total revenue curves Suppose Kenji 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 Kenji'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 Kenji produces. 200 175 Total Revenue 150 Total Cost 125 Profit 100 -25 TOTAL COST AND REVENUE (Dollars)

3. Profit maximization using total cost and total revenue curves Suppose Kenji 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 Kenji'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 Kenji produces. 200 175 Total Revenue 150 Total Cost 125 Profit 100 -25 TOTAL COST AND REVENUE (Dollars)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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