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Suppose Madison operates a handicraft pop-up retail shop that sells rompers. Assume a perfectly competitive market structure for rompers with a market price equal to $20 per romper. The following graph shows Madison's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for rompers for quantities zero through seven (including zero and seven) that Madison produces. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 Total Cost 75 25 1 2 3 7 QUANTITY (Rompers) Total Revenue • • Profit ? Calculate Madison's marginal revenue and marginal cost for the first seven rompers they produce, 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. ? COSTS AND REVENUE (Dollars per romper) 40 35 25 20 15 10 5 3 5 6 7 QUANTITY (Rompers) Marginal Revenue Marginal Cost Madison's profit is maximized when they produce a total of rompers. At this quantity, the marginal cost of the final romper they produce is received for each romper they sell. At this point, the marginal cost of producing one more romper (the first romper beyond the profit maximizing quantity) is the price received for each romper they sell. Therefore, Madison's profit-maximizing quantity occurs at the point of intersection between the Because Madison is a price taker, the previous condition is equivalent to , an amount than the price an amount than curves.

Suppose Madison operates a handicraft pop-up retail shop that sells rompers. Assume a perfectly competitive market structure for rompers with a market price equal to $20 per romper. The following graph shows Madison's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for rompers for quantities zero through seven (including zero and seven) that Madison produces. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 Total Cost 75 25 1 2 3 7 QUANTITY (Rompers) Total Revenue • • Profit ? Calculate Madison's marginal revenue and marginal cost for the first seven rompers they produce, 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. ? COSTS AND REVENUE (Dollars per romper) 40 35 25 20 15 10 5 3 5 6 7 QUANTITY (Rompers) Marginal Revenue Marginal Cost Madison's profit is maximized when they produce a total of rompers. At this quantity, the marginal cost of the final romper they produce is received for each romper they sell. At this point, the marginal cost of producing one more romper (the first romper beyond the profit maximizing quantity) is the price received for each romper they sell. Therefore, Madison's profit-maximizing quantity occurs at the point of intersection between the Because Madison is a price taker, the previous condition is equivalent to , an amount than the price an amount than curves.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose Madison operates a handicraft pop-up retail shop that sells rompers. Assume a perfectly competitive market structure for rompers with a market price equal to $20 per romper. The following graph shows Madison's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for rompers for quantities zero through seven (including zero and seven) that Madison produces. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 Total Cost 75 25 1 2 3 7 QUANTITY (Rompers) Total Revenue • • Profit ? Calculate Madison's marginal revenue and marginal cost for the first seven rompers they produce, 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. ? COSTS AND REVENUE (Dollars per romper) 40 35 25 20 15 10 5 3 5 6 7 QUANTITY (Rompers) Marginal Revenue Marginal Cost Madison's profit is maximized when they produce a total of rompers. At this quantity, the marginal cost of the final romper they produce is received for each romper they sell. At this point, the marginal cost of producing one more romper (the first romper beyond the profit maximizing quantity) is the price received for each romper they sell. Therefore, Madison's profit-maximizing quantity occurs at the point of intersection between the Because Madison is a price taker, the previous condition is equivalent to , an amount than the price an amount than curves.
Transcribed Image Text:Suppose Madison operates a handicraft pop-up retail shop that sells rompers. Assume a perfectly competitive market structure for rompers with a market price equal to $20 per romper. The following graph shows Madison's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for rompers for quantities zero through seven (including zero and seven) that Madison produces. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 Total Cost 75 25 1 2 3 7 QUANTITY (Rompers) Total Revenue • • Profit ? Calculate Madison's marginal revenue and marginal cost for the first seven rompers they produce, 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. ? COSTS AND REVENUE (Dollars per romper) 40 35 25 20 15 10 5 3 5 6 7 QUANTITY (Rompers) Marginal Revenue Marginal Cost Madison's profit is maximized when they produce a total of rompers. At this quantity, the marginal cost of the final romper they produce is received for each romper they sell. At this point, the marginal cost of producing one more romper (the first romper beyond the profit maximizing quantity) is the price received for each romper they sell. Therefore, Madison's profit-maximizing quantity occurs at the point of intersection between the Because Madison is a price taker, the previous condition is equivalent to , an amount than the price an amount than curves.
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