4. Profit maximization using total cost and total revenue curvesSuppose Kenji runs a small business that manufactures shirts. Assume that the market for shirts is a price-taker market, and the market price is $10per shirt.The following graph shows Kenji'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 Kenjiproduces, including zero shirts.TOTAL COST AND REVENUE (Dollars)1251007550-25-500☐1☐2☐☐3 45QUANTITY (Shirts)6Total Cost■7 8***Total RevenueProfit(?) Calculate Kenji'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.?308COSTS AND REVENUE (Dollars per shirt)2515O1000125QUANTITY (Shirts)346Kenji's profit is maximized when he produces78would maximize his profit) is $ which ismaximizing quantity corresponds to the intersection of thelast condition can also be written asMarginal Revenueshirts. When he does this, the marginal cost of the last shirt he produces is $which isthan the price Kenji receives for each shirt he sells. The marginal cost of producing an additional shirt (that is, one more shirt thanthan the price Kenji receives for each shirt he sells. Therefore, Kenji's profit-curves. Because Kenji is a price taker, thisMarginal Cost

Marginal revenue is calculated as the ratio of change in total revenue to change in quantity.…

Suppose Kenji runs a small business that manufactures shirts. Assume that the market for shirts is a price-taker market, and the market price is $10 per shirt. The following graph shows Kenji'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 Kenji produces, including zero shirts. TOTAL COST AND REVENUE (Dollars) 125 100 25 -50 0 1 ☐ 2 ☐ 4 ☐ 3 5 QUANTITY (Shirts) □ 6 Total Cost ☐ 7 8 Total Revenue Profit ?

Suppose Kenji runs a small business that manufactures shirts. Assume that the market for shirts is a price-taker market, and the market price is $10 per shirt. The following graph shows Kenji'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 Kenji produces, including zero shirts. TOTAL COST AND REVENUE (Dollars) 125 100 25 -50 0 1 ☐ 2 ☐ 4 ☐ 3 5 QUANTITY (Shirts) □ 6 Total Cost ☐ 7 8 Total Revenue Profit ?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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