3. Profit maximization using total cost and total revenue curves Suppose Amari operates a handicraft pop-up retail shop that sells cardigans. Assume a perfectly competitive market structure for cardigans with a market price equal to $20 per cardigan. The following graph shows Amari's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for cardigans for quantities zero through seven (including zero and seven) that Amari produces. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 R 10 O # 0 O 0 O 2 0 □ O QUANTITY (Cardigans) 6 Total Cost Total Revenue Profit

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Calculate Amari's marginal revenue and marginal cost for the first seven cardigans 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.
9
8
COSTS AND REVENUE (Dollars per cardigan)
35
20
15
10
1
2
5
QUANTITY (Cardigans)
6
7
Marginal Revenue
Marginal Cost
, an amount
Amari's profit is maximized when they produce a total of
cardigans. At this quantity, the marginal cost of the final cardigan they
produce is $
than the price received for each cardigan they sell. At this point, the marginal cost of
producing one more cardigan (the first cardigan beyond the profit maximizing quantity) is $
, an amount
than the price
received for each cardigan they sell. Therefore, Amari's profit-maximizing quantity occurs at the point of intersection between
the
curves. Because Amari is a price taker, the previous condition is equivalent to
Transcribed Image Text:Calculate Amari's marginal revenue and marginal cost for the first seven cardigans 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. 9 8 COSTS AND REVENUE (Dollars per cardigan) 35 20 15 10 1 2 5 QUANTITY (Cardigans) 6 7 Marginal Revenue Marginal Cost , an amount Amari's profit is maximized when they produce a total of cardigans. At this quantity, the marginal cost of the final cardigan they produce is $ than the price received for each cardigan they sell. At this point, the marginal cost of producing one more cardigan (the first cardigan beyond the profit maximizing quantity) is $ , an amount than the price received for each cardigan they sell. Therefore, Amari's profit-maximizing quantity occurs at the point of intersection between the curves. Because Amari is a price taker, the previous condition is equivalent to
3. Profit maximization using total cost and total revenue curves
Suppose Amari operates a handicraft pop-up retail shop that sells cardigans. Assume a perfectly competitive market structure for cardigans
with a market price equal to $20 per cardigan.
The following graph shows Amari's total cost curve.
Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for cardigans for quantities zero
through seven (including zero and seven) that Amari produces.
200
175
8
TOTAL COST AND REVENUE (Dollars)
8
3
8
12
10
0
1
0
0
0
O
QUANTITY (Cardigans)
D
Total Cost
7
6
Total Revenue
Profit
?
Transcribed Image Text:3. Profit maximization using total cost and total revenue curves Suppose Amari operates a handicraft pop-up retail shop that sells cardigans. Assume a perfectly competitive market structure for cardigans with a market price equal to $20 per cardigan. The following graph shows Amari's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for cardigans for quantities zero through seven (including zero and seven) that Amari produces. 200 175 8 TOTAL COST AND REVENUE (Dollars) 8 3 8 12 10 0 1 0 0 0 O QUANTITY (Cardigans) D Total Cost 7 6 Total Revenue Profit ?
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Calculate Rian'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. 

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