Suppose Megan runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $25 per teddy bear. The following graph shows Megan'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 Megan produces, including zero teddy bears. TOTAL COST AND REVENUE (Dollars) 200 COSTS AND REVENUE (Dollars per teddy bear) 175 150 125 100 75 50 25 0 -25 S 35 30 20 20 5 10 n 5 0 1 0 2 Calculate Megan's marginal revenue and marginal cost for the first seven teddy bears she 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. 1 D 2 3 4 5 QUANTITY (Teddy bears) 0 3 4 5 QUANTITY (Teddy bears) 6 Total Cost 6 7 8 7 Total Revenue 8 Profit O ? Marginal Revenue -O Marginal Cost Megan's profit is maximized when she produces teddy bears. When she does this, the marginal cost of the last teddy bear she produces is than the price Megan receives for each teddy bear she sells. The marginal cost of producing an additional teddy bear (that is, one more teddy bear than would maximize her profit) is $ ], which is than the price Megan receives for each teddy bear which is she sells. Therefore, Megan's profit-maximizing quantity corresponds to the Intersection of the Because Megan is a price taker, this last condition can also be written as curves.
Suppose Megan runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $25 per teddy bear. The following graph shows Megan'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 Megan produces, including zero teddy bears. TOTAL COST AND REVENUE (Dollars) 200 COSTS AND REVENUE (Dollars per teddy bear) 175 150 125 100 75 50 25 0 -25 S 35 30 20 20 5 10 n 5 0 1 0 2 Calculate Megan's marginal revenue and marginal cost for the first seven teddy bears she 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. 1 D 2 3 4 5 QUANTITY (Teddy bears) 0 3 4 5 QUANTITY (Teddy bears) 6 Total Cost 6 7 8 7 Total Revenue 8 Profit O ? Marginal Revenue -O Marginal Cost Megan's profit is maximized when she produces teddy bears. When she does this, the marginal cost of the last teddy bear she produces is than the price Megan receives for each teddy bear she sells. The marginal cost of producing an additional teddy bear (that is, one more teddy bear than would maximize her profit) is $ ], which is than the price Megan receives for each teddy bear which is she sells. Therefore, Megan's profit-maximizing quantity corresponds to the Intersection of the Because Megan is a price taker, this last condition can also be written as curves.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Transcribed Image Text:Suppose Megan runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the
market price is $25 per teddy bear.
The following graph shows Megan'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 Megan
produces, including zero teddy bears.
200 T
175
150
125
100
75
50
0
-25
35
30
20
15
10
5
0
0
D
0
1
2
1
C
2
D
☐
3
4
5
QUANTITY (Teddy bears)
Calculate Megan's marginal revenue and marginal cost for the first seven teddy bears she 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.
(?)
0
3
4
5
QUANTITY (Teddy bears)
6
Total Cost
0
6
7
8
7
O
8
Total Revenue
A
Profit
O
(?)
Marginal Revenue
Marginal Cost
Megan's profit is maximized when she produces
teddy bears. When she does this, the marginal cost of the last teddy bear she produces is
, which is
than the price Megan recelves for each teddy bear she sells. The marginal cost of producing an additional teddy bear
(that is, one more teddy bear than would maximize her profit) is $, which is
than the price Megan receives for each teddy bear
$,
▾ curves.
she sells. Therefore, Megan's profit-maximizing quantity corresponds to the intersection of the
Because Megan is a price taker, this last condition can also be written as
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