2 3. Profit maximization using total cost and total revenue curvesSuppose Amy runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the marketprice is $20 per frying pan.The following graph shows Amy's total cost curve.Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for frying pans quantities zero throughseven (inclusive) that Amy produces.Dollars)TOTAL COST AND REVENUE200COSTS AND REVENUE (Dollars per frying pan)17515012510075-254035302015105001Calculate Amy's marginal revenue and marginal cost for the first seven frying pans she produces, and plot them on the following graph. Use the bluepoints (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity.(?)02QUANTITY (Frying pans)236QUANTITY (Frying pans)66Total Cost770-0Total Revenue-0ProfitMarginal RevenueMarginal Cost(?)Amy's profit is maximized when she producesS, which is(that is, one more frying pan than would maximize her profit) is S, which issells. Therefore, Amy's profit-maximizing quantity corresponds to the intersection of theAmy is a price taker, this last condition can also be written asfrying pans. When she does this, the marginal cost of the last frying pan she produces isthan the price Amy receives for each frying pan she sells. The marginal cost of producing an additional frying panthan the price Amy receives for each frying pan shecurves. Because

Profit maximization is the process business firms go through to guarantee the best result and price…

Suppose Amy 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 Amy's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for frying pans quantities zero through seven (inclusive) that Amy produces. ?

Suppose Amy 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 Amy's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for frying pans quantities zero through seven (inclusive) that Amy produces. ?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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