Bundle: Managerial Economics: Applications, Strategies And Tactics, 14th + Mindtap Economics, 1 Term (6 Months) Printed Access Card
Bundle: Managerial Economics: Applications, Strategies And Tactics, 14th + Mindtap Economics, 1 Term (6 Months) Printed Access Card
14th Edition
ISBN: 9781337198196
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter 13, Problem 1.3CE
To determine

To describe:

The category of cost must be covered by the early penetration prices

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Sam's profit is maximized when he produces   shirts. When he does this, the marginal cost of the last shirt he produces is   , which is    than the price Sam receives for each shirt he sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize his profit) is   , which is    than the price Sam receives for each shirt he sells. Therefore, Sam's profit-maximizing quantity corresponds to the intersection of the    curves. Because Sam is a price taker, this last condition can also be written as    .
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