COSTS AND REVENUE (Dollars per shirt) TOTAL COST AND REVENUE (Dollars) uppose Nick runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $25 er shirt. me following graph shows Nick's total cost curve. se the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven shirts that Nick roduces, including zero shirts. 175 Total Revenue 150 Total Cost A 125 Profit 100 75 25 2 3 QUANTITY (Shirts) Calculate Nick's marginal revenue and marginal cost for the first seven shirts 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. 36 80 26 20 15 10 2 QUANTITY (Shirts) 0 Marginal Revenue -D- Marginal Cost Nick's profit is maximized when he produces shirts. When he does this, the marginal cost of the last shirt he produces is S which is than the price Nick receives for each shirt he sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize his profit) is 5 than the price Nick receives for each shirt he sells. Therefore, Nick's profit-maximizing which is quantity corresponds to the intersection of the curves. Because Nick is a price taker, this last condition can also be written as
COSTS AND REVENUE (Dollars per shirt) TOTAL COST AND REVENUE (Dollars) uppose Nick runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $25 er shirt. me following graph shows Nick's total cost curve. se the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven shirts that Nick roduces, including zero shirts. 175 Total Revenue 150 Total Cost A 125 Profit 100 75 25 2 3 QUANTITY (Shirts) Calculate Nick's marginal revenue and marginal cost for the first seven shirts 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. 36 80 26 20 15 10 2 QUANTITY (Shirts) 0 Marginal Revenue -D- Marginal Cost Nick's profit is maximized when he produces shirts. When he does this, the marginal cost of the last shirt he produces is S which is than the price Nick receives for each shirt he sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize his profit) is 5 than the price Nick receives for each shirt he sells. Therefore, Nick's profit-maximizing which is quantity corresponds to the intersection of the curves. Because Nick is a price taker, this last condition can also be written as
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:muppose Nick runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $25
er shirt.
The following graph shows Nick'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 shirts that Nick
produces, including zero shirts.
VENUE (Dollars)
175
150
Total Cost
125
100
75
50
2
3
7
QUANTITY (Shirts)
Total Revenue
A
Profit
Calculate Nick's marginal revenue and marginal cost for the first seven shirts 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.
COSTS AND REVENUE
Dollars per shirt)
15
10
36
6
6
QUANTITY (Shirts)
Nick's profit is maximized when he produces
Marginal Revenue
ロー
Marginal Cost
shirts. When he does this, the marginal cost of the last shirt he produces is $
which is
than the price Nick receives for each shirt he sells. The marginal cost of producing an additional shirt (that is, one more shirt than would
maximize his profit) is S
than the price Nick receives for each shirt he sells. Therefore, Nick's profit-maximizing
which is
quantity corresponds to the intersection of the
curves. Because Nick is a price taker, this last condition
can also be written as
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