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3. Profit maximization using total cost and total revenue curves Suppose Musashi runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan. The following graph shows Musashi's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven frying pans that Musashi produces, including zero frying pans. 200 175 150 125 100 75 50 25 0 -25 0 0 40 35 30 25 20 15 10 5 0 D 0 1 2 3 4 Calculate Musashi's marginal revenue and marginal cost for the first seven frying pans he produces, 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. (?) DO 1 5 QUANTITY (Frying pans) D 2 ☐ 6 Total Cost 7 0 D OO 8 3 5 6 7 QUANTITY (Frying pans) -O- 8 Total Revenue A Profit -O (2 Marginal Revenue -0- Marginal Cost Musashi's profit is maximized when he produces frying pans. When he does this, the marginal cost of the last frying pan he produces is than the price Musashi receives for each frying pan he sells. The marginal cost of producing an additional frying pan (that is, one more frying pan than would maximize his profit) is $ , which is than the price Musashi receives for each frying pan he $ which is curves. sells. Therefore, Musashi's profit-maximizing quantity corresponds to the intersection of the Because Musashi is a price taker, this last condition can also be written as

3. Profit maximization using total cost and total revenue curves Suppose Musashi runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan. The following graph shows Musashi's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven frying pans that Musashi produces, including zero frying pans. 200 175 150 125 100 75 50 25 0 -25 0 0 40 35 30 25 20 15 10 5 0 D 0 1 2 3 4 Calculate Musashi's marginal revenue and marginal cost for the first seven frying pans he produces, 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. (?) DO 1 5 QUANTITY (Frying pans) D 2 ☐ 6 Total Cost 7 0 D OO 8 3 5 6 7 QUANTITY (Frying pans) -O- 8 Total Revenue A Profit -O (2 Marginal Revenue -0- Marginal Cost Musashi's profit is maximized when he produces frying pans. When he does this, the marginal cost of the last frying pan he produces is than the price Musashi receives for each frying pan he sells. The marginal cost of producing an additional frying pan (that is, one more frying pan than would maximize his profit) is $ , which is than the price Musashi receives for each frying pan he $ which is curves. sells. Therefore, Musashi's profit-maximizing quantity corresponds to the intersection of the Because Musashi is a price taker, this last condition can also be written as

Principles of Microeconomics (MindTap Course List)
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter16: Monopolistic Competition
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3. Profit maximization using total cost and total revenue curves Suppose Musashi runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan. The following graph shows Musashi's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven frying pans that Musashi produces, including zero frying pans. COST AND REVENUE (Dollars) 200 175 150 125 100 75 50 25 0 -25 ■ 0 40 35 30 25 20 15 10 5 0 D 0 1 n 2 Calculate Musashi's marginal revenue and marginal cost for the first seven frying pans he produces, 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. 1 G 0 7 3 4 4 5 QUANTITY (Frying pans) 2 000 000 6 7 8 Total Cost 0 3 4 5 QUANTITY (Frying pans) Musashi's profit is maximized when he produces which is 6 7 O 8 Total Revenue Profit (?) ·|·| Marginal Revenue Marginal Cost frying pans. When he does this, the marginal cost of the last frying pan he produces is than the price Musashi receives for each frying pan he sells. The marginal cost of producing an additional frying pan , which is than the price Musashi receives for each frying pan he curves. $ (that is, one more frying pan than would maximize his profit) is $ sells. Therefore, Musashi's profit-maximizing quantity corresponds to the intersection of the Because Musashi is a price taker, this last condition can also be written as
Transcribed Image Text:3. Profit maximization using total cost and total revenue curves Suppose Musashi runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan. The following graph shows Musashi's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven frying pans that Musashi produces, including zero frying pans. COST AND REVENUE (Dollars) 200 175 150 125 100 75 50 25 0 -25 ■ 0 40 35 30 25 20 15 10 5 0 D 0 1 n 2 Calculate Musashi's marginal revenue and marginal cost for the first seven frying pans he produces, 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. 1 G 0 7 3 4 4 5 QUANTITY (Frying pans) 2 000 000 6 7 8 Total Cost 0 3 4 5 QUANTITY (Frying pans) Musashi's profit is maximized when he produces which is 6 7 O 8 Total Revenue Profit (?) ·|·| Marginal Revenue Marginal Cost frying pans. When he does this, the marginal cost of the last frying pan he produces is than the price Musashi receives for each frying pan he sells. The marginal cost of producing an additional frying pan , which is than the price Musashi receives for each frying pan he curves. $ (that is, one more frying pan than would maximize his profit) is $ sells. Therefore, Musashi's profit-maximizing quantity corresponds to the intersection of the Because Musashi is a price taker, this last condition can also be written as
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