Suppose Lucia runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a price-taker market, and the market price is $20 per teddy bear.The following graph shows Lucia’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 teddy bears that Lucia produces, including zero teddy bears.**Graph Explanation:**- The vertical axis represents "Total Cost and Revenue (Dollars)" ranging from -50 to 175.- The horizontal axis represents "Quantity (Teddy Bears)" ranging from 0 to 8.- An orange line with square markers represents the "Total Cost," increasing from approximately $20 to $130 as production increases from 0 to 7 teddy bears.- The graph legend includes: - A blue circle for "Total Revenue" - A green triangle for "Profit" Currently, only the "Total Cost" line is plotted on the graph. To complete the graph, plot the total revenue and profit using the appropriate symbols provided. **Graph Analysis**The graph is designed to help calculate Lucia's marginal revenue and marginal cost for producing up to seven teddy bears. The y-axis represents "COSTS AND REVENUE" measured in dollars per teddy bear, while the x-axis shows the "QUANTITY" of teddy bears, ranging from 0 to 8.In this graph:- **Blue Points (Circle Symbol):** Represent marginal revenue.- **Orange Points (Square Symbol):** Represent marginal cost.**Instructions for Calculation**1. Plot the marginal revenue for each teddy bear produced using the blue points.2. Plot the marginal cost for each teddy bear produced using the orange points.**Text Instructions**Lucia's profit is maximized when she produces [_____] teddy bears. At this point:- The marginal cost of the last teddy bear produced is [_____] dollars, which is [higher/lower] than the price Lucia receives for each teddy bear sold. - The marginal cost of producing an additional teddy bear (one more teddy bear beyond the profit-maximizing point) is [_____] dollars, which is [higher/lower] than the price received.Therefore, Lucia's profit-maximizing quantity corresponds to the intersection of the [_____] and [_____] curves. As Lucia is a price taker, this condition can also be outlined as [_____________________].

Answered: Suppose Lucia runs a small business…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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