Lise the blue paints (circle symbal) to plot total revenue and the green points (triangle symbal) to plot profit for teddy bears quantities zero through seven (inclusive) that Yakov produces. 200 175 Total Revenue 190 Total Cost 125 Proft 100 25 -25 1. QUANTITY (Teddy bears) (sIeonl anNARH INV Ison IVLO

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3. Profit maximization using total cost and total revenue curves

Suppose Yakov runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $25 per teddy bear.
The following graph shows Yakov's total cost curve.
Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for teddy bears quantities zero through seven (inclusive) that Yakov produces.
 
 
Yakov's profit is maximized when he produces
 
teddy bears. When he does this, the marginal cost of the last teddy bear he produces is
 
, which is ___   than the price Yakov receives for each teddy bear he sells. The marginal cost of producing an additional teddy bear (that is, one more teddy bear than would maximize his profit) is
 
, which is    than the price Yakov receives for each teddy bear he sells. Therefore, Yakov's profit-maximizing quantity corresponds to the intersection of the    curves. Because Yakov is a price taker, this last condition can also be written as    .
Lise the blue paints (circle symbal) to plot total revenue and the green points (triangle symbal) to plot profit for teddy bears quantities zero through
seven (inclusive) that Yakov produces.
200
175
Total Revenue
190
Total Cost
125
Proft
100
25
-25
1.
QUANTITY (Teddy bears)
(sIeonl anNARH INV Ison IVLO
Transcribed Image Text:Lise the blue paints (circle symbal) to plot total revenue and the green points (triangle symbal) to plot profit for teddy bears quantities zero through seven (inclusive) that Yakov produces. 200 175 Total Revenue 190 Total Cost 125 Proft 100 25 -25 1. QUANTITY (Teddy bears) (sIeonl anNARH INV Ison IVLO
Calculate Yakov's marginal revenue and marginal cost for the first seven teddy bears he produces, and plot them an the following graph. Lise the blue
points (circle symbol) to piot marginal revenue and the orange points (square symbal) to plot marginal cost at each quantity.
Marginal Revenue
Marginal Cost
20
15
10
QUANTITY (Teddy bears)
Yakov's profit is maximized when he produces
teddy bears. When he does this, the marginal oost of the last teddy bear he produces is
, which is less v than the price Yakov receives for each teddy bear he sells. The marginal cost of producing an additional teddy bear
(that is, one more teddy bear than would maximize his profit) iss
,which is
v than the price Yakov receives for each teddy bear
he sells. Therefore, Yakov's profit-maximizing quantity coresponds to the intersection of the
curves.
Because Yakov is a price taker, this last condition can also be written as
(eag Appm ad son) anNAAH IN R ISOn
Transcribed Image Text:Calculate Yakov's marginal revenue and marginal cost for the first seven teddy bears he produces, and plot them an the following graph. Lise the blue points (circle symbol) to piot marginal revenue and the orange points (square symbal) to plot marginal cost at each quantity. Marginal Revenue Marginal Cost 20 15 10 QUANTITY (Teddy bears) Yakov's profit is maximized when he produces teddy bears. When he does this, the marginal oost of the last teddy bear he produces is , which is less v than the price Yakov receives for each teddy bear he sells. The marginal cost of producing an additional teddy bear (that is, one more teddy bear than would maximize his profit) iss ,which is v than the price Yakov receives for each teddy bear he sells. Therefore, Yakov's profit-maximizing quantity coresponds to the intersection of the curves. Because Yakov is a price taker, this last condition can also be written as (eag Appm ad son) anNAAH IN R ISOn
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