TOTAL COST AND REVENUE (Dollars) Imagine Lucia runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan. 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 frying pans quantities zero through seven (inclusive) that Lucia produces. 200 175 150 Total Cost 125 100 75 1 QUANTITY (Frying pans) ° Total Revenue Profit ? Calculate Lucia's marginal revenue and marginal cost for the first seven frying pans 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 at each quantity. COSTS AND REVENUE (Dollars per frying pan) 40 35 Marginal Revenue Marginal Cost 20 15 10 (?) TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 75 Total Revenue Total Cost -25 6 7 QUANTITY (Frying pans) Profit Calculate Lucia's marginal revenue and marginal cost for the first seven frying pans 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 at each quantity. (?) COSTS AND REVENUE (Dollars per frying pan) 15 10 5 1 35 2 3 5 6 7 QUANTITY (Frying pans) Marginal Revenue -0- Marginal Cost Lucia's profit is maximised when she produces[ $ which is frying pans. When she does this, the marginal cost of the last frying pan she produces is than the price Lucia receives for each frying pan she sells. The marginal cost of producing an additional frying pan (that is, one more frying pan than would maximise her profit) is S which is than the price Lucia receives for each frying pan she sells. Therefore, Lucia's profit-maximising quantity corresponds to the intersection of the Because Lucia is a price taker, this last condition can also be written as curves.
TOTAL COST AND REVENUE (Dollars) Imagine Lucia runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan. 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 frying pans quantities zero through seven (inclusive) that Lucia produces. 200 175 150 Total Cost 125 100 75 1 QUANTITY (Frying pans) ° Total Revenue Profit ? Calculate Lucia's marginal revenue and marginal cost for the first seven frying pans 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 at each quantity. COSTS AND REVENUE (Dollars per frying pan) 40 35 Marginal Revenue Marginal Cost 20 15 10 (?) TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 75 Total Revenue Total Cost -25 6 7 QUANTITY (Frying pans) Profit Calculate Lucia's marginal revenue and marginal cost for the first seven frying pans 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 at each quantity. (?) COSTS AND REVENUE (Dollars per frying pan) 15 10 5 1 35 2 3 5 6 7 QUANTITY (Frying pans) Marginal Revenue -0- Marginal Cost Lucia's profit is maximised when she produces[ $ which is frying pans. When she does this, the marginal cost of the last frying pan she produces is than the price Lucia receives for each frying pan she sells. The marginal cost of producing an additional frying pan (that is, one more frying pan than would maximise her profit) is S which is than the price Lucia receives for each frying pan she sells. Therefore, Lucia's profit-maximising quantity corresponds to the intersection of the Because Lucia 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
Imagine Lucia runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan.
Transcribed Image Text:TOTAL COST AND REVENUE (Dollars)
Imagine Lucia runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market
price is $20 per frying pan.
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 frying pans quantities zero through
seven (inclusive) that Lucia produces.
200
175
150
Total Cost
125
100
75
1
QUANTITY (Frying pans)
°
Total Revenue
Profit
?
Calculate Lucia's marginal revenue and marginal cost for the first seven frying pans 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 at each quantity.
COSTS AND REVENUE (Dollars per frying pan)
40
35
Marginal Revenue
Marginal Cost
20
15
10
(?)
Transcribed Image Text:TOTAL COST AND REVENUE (Dollars)
200
175
150
125
100
75
Total Revenue
Total Cost
-25
6
7
QUANTITY (Frying pans)
Profit
Calculate Lucia's marginal revenue and marginal cost for the first seven frying pans 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 at each quantity.
(?)
COSTS AND REVENUE (Dollars per frying pan)
15
10
5
1
35
2
3
5
6
7
QUANTITY (Frying pans)
Marginal Revenue
-0-
Marginal Cost
Lucia's profit is maximised when she produces[
$
which is
frying pans. When she does this, the marginal cost of the last frying pan she produces is
than the price Lucia receives for each frying pan she sells. The marginal cost of producing an additional frying pan
(that is, one more frying pan than would maximise her profit) is S which is
than the price Lucia receives for each frying pan she
sells. Therefore, Lucia's profit-maximising quantity corresponds to the intersection of the
Because Lucia is a price taker, this last condition can also be written as
curves.
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