Suppose Dmitri 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 Dmitri'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 Dmitri produces. Dmitri's profit is maximized when he produces frying pans. When he does this, the marginal cost of the last frying pan he produces is , which is than the price Dmitri 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 Dmitri receives for each frying pan he sells. Therefore, Dmitri's profit-maximizing quantity corresponds to the intersection of the curves. Because Dmitri is a price taker, this last condition can also be written as .
Suppose Dmitri 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 Dmitri'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 Dmitri produces. Dmitri's profit is maximized when he produces frying pans. When he does this, the marginal cost of the last frying pan he produces is , which is than the price Dmitri 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 Dmitri receives for each frying pan he sells. Therefore, Dmitri's profit-maximizing quantity corresponds to the intersection of the curves. Because Dmitri 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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Suppose Dmitri 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 Dmitri'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 Dmitri produces.
Dmitri's profit is maximized when he produces
frying pans. When he does this, the marginal cost of the last frying pan he produces is
, which is than the price Dmitri 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 Dmitri receives for each frying pan he sells. Therefore, Dmitri's profit-maximizing quantity corresponds to the intersection of the curves. Because Dmitri is a price taker, this last condition can also be written as .
Transcribed Image Text:Module Five Quiz
Calculate Dmitri'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.
35
Marginal Revenue
30
25
Marginal Cost
20
15
10
QUANTITY (Frying pans)
(ued Buku Jad suejog) anNBA3N ONV SISO)
Transcribed Image Text:Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for frying pans quanbibies zero through
seven (inclusive) that Dmitri produces.
175
Total Revenue
150
125
Total Cost
Proft
100
75
25
2
QUANTITY (Frying pans)
TOTAL COST AND REVENUE (Dalars)
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