TOTAL COST AND REVENUE (Dollars) 100 Total Cost ם Total Revenue 75 50 -25 A 50 0 1 2 5 QUANTITY (Shirts) A A Profit Calculate Neha's marginal revenue and marginal cost for the first seven shirts 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. (?) COSTS AND REVENUE (Dollars per shirt) 30 25 225 20 15 10 о OO 2 3 A 5 6 QUANTITY (Shirts) Marginal Revenue + Marginal Cost Neha's profit is maximized when she produces 10 shirts. When she does this, the marginal cost of the previous shirt she produces is $ which is than the price Neha receives for each shirt she sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize her profit) is S than the price Neha receives for each shirt she sells. Therefore, Neha's profit- maximizing quantity corresponds to the intersection of the which is curves. Because Neha is a price taker, this last condition can also be written as

Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter7: Production, Costs, And Industry Structure
Section: Chapter Questions
Problem 32CTQ: How does fixed cost affect marginal cost? Why is this relationship important?
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TOTAL COST AND REVENUE (Dollars)
100
Total Cost
ם
Total Revenue
75
50
-25
A
50
0
1
2
5
QUANTITY (Shirts)
A
A
Profit
Calculate Neha's marginal revenue and marginal cost for the first seven shirts 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.
(?)
COSTS AND REVENUE (Dollars per shirt)
30
25
225
20
15
10
о
OO
2
3
A
5
6
QUANTITY (Shirts)
Marginal Revenue
+
Marginal Cost
Neha's profit is maximized when she produces 10 shirts. When she does this, the marginal cost of the previous shirt she produces is $
which is
than the price Neha receives for each shirt she sells. The marginal cost of producing an additional shirt (that is, one more shirt
than would maximize her profit) is S
than the price Neha receives for each shirt she sells. Therefore, Neha's profit-
maximizing quantity corresponds to the intersection of the
which is
curves. Because Neha is a price taker, this
last condition can also be written as
Transcribed Image Text:TOTAL COST AND REVENUE (Dollars) 100 Total Cost ם Total Revenue 75 50 -25 A 50 0 1 2 5 QUANTITY (Shirts) A A Profit Calculate Neha's marginal revenue and marginal cost for the first seven shirts 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. (?) COSTS AND REVENUE (Dollars per shirt) 30 25 225 20 15 10 о OO 2 3 A 5 6 QUANTITY (Shirts) Marginal Revenue + Marginal Cost Neha's profit is maximized when she produces 10 shirts. When she does this, the marginal cost of the previous shirt she produces is $ which is than the price Neha receives for each shirt she sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize her profit) is S than the price Neha receives for each shirt she sells. Therefore, Neha's profit- maximizing quantity corresponds to the intersection of the which is curves. Because Neha is a price taker, this last condition can also be written as
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