3. Profit maximization using total cost and total revenue curvesSuppose Cho runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt.The following graph shows Cho's total cost curve.Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven (inclusive) that Cho produces. 3. Profit maximization using total cost and total revenue curvesSuppose Cho runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20per shirt.The following graph shows Cho's total cost curve.Lise the blue paints (circle symbal) to plat total revenue and the green points (triangie symbal) to plot profit for shirts quantities zero through seven(inclusive) that Cho produces.200175Total Revenue190Total CostA125Proft100755025-2514QUANTITY (Shits)Calculate Cho's marginaland marginal cost forfrst seven shirts she produces, and plot them an the following graph. Liseblve paints(circde symbol) to piot marginal revenue and the orange points (square symbal) to plot marginal cast at each quantity.40Marginal Reverue3025Marginal Cost2010DIQUANTITY (Shirts)Cho's profit is maximized when she producesshirts. When she does this, the marginal cost of the last shirt she produces is Swhichis- than the price Cho receives for each shirt she sells. The marginal cost of producing an additional shirt (that is, one more shirt thanwould maximize her profit) iswhich isthan the price Cho receives for each shirt she sells. Therefore, Cho's profit-maximizingquantity corresponds to the intersection of thev curves. Because Cho is a price taker, this last conditioncan also be written as(seon) annAAAH CIN Is0O TOI(uS Jad seoni anNAAD4 INY RISOO

Selling a product or service at a predetermined price generates a company's revenue. An…

3. Profit maximization using total cost and total revenue curves Suppose Cho runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt. The following graph shows Cho's total cost curve. Lise the blue points (aircle symbol) to plat total revenue and the green points (triangle symbal) to plot profit for shirts quantities zero through seven (inclusive) that Cho produces. 200 175 Total Revenue 190 Total Cost 125 Prott 100 75 25 25 QUANTITY (Sins) Cakculate Cho's marginal revenue and marginal cost for the first seven shirts she produces, and plot them on the following graph. Use the blue points (circde symbol) to piot marginal revenue and the orange points (square symbal) to plot marginal cost at each quantity. Marginal Reverue Marginal Cost 1. QUANTITY (Ss) Cho's profit is maximized when she produces shirts. When she does this, the marginal cost of the last shirt she produces is which is - than the price Cho recelves 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 . which is v than the price Cho receives for each shirt she sells. Therefore, Cho's profit-maximizing quantity corresponds to the intersection of the curves. Because Cho is a price taker, this last condition can also be written as RRR CUSIS ANU VENUE oears per snt (seon) anwaAH ISnn ni

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter8: Output, Price, And Profit: The Importance Of Marginal Analysis

Section: Chapter Questions

Problem 5TY

See similar textbooks

3. Profit maximization using total cost and total revenue curves

Suppose Cho runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt.

The following graph shows Cho's total cost curve.

Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven (inclusive) that Cho produces.

3. Profit maximization using total cost and total revenue curves
Suppose Cho runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20
per shirt.
The following graph shows Cho's total cost curve.
Lise the blue paints (circle symbal) to plat total revenue and the green points (triangie symbal) to plot profit for shirts quantities zero through seven
(inclusive) that Cho produces.
200
175
Total Revenue
190
Total Cost
A
125
Proft
100
75
50
25
-25
1
4
QUANTITY (Shits)
Calculate Cho's marginal
and marginal cost for
frst seven shirts she produces, and plot them an the following graph. Lise
blve paints
(circde symbol) to piot marginal revenue and the orange points (square symbal) to plot marginal cast at each quantity.
40
Marginal Reverue
30
25
Marginal Cost
20
10
DI
QUANTITY (Shirts)
Cho's profit is maximized when she produces
shirts. When she does this, the marginal cost of the last shirt she produces is S
which
is
- than the price Cho 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
which is
than the price Cho receives for each shirt she sells. Therefore, Cho's profit-maximizing
quantity corresponds to the intersection of the
v curves. Because Cho is a price taker, this last condition
can also be written as
(seon) annAAAH CIN Is0O TOI
(uS Jad seoni anNAAD4 INY RISOO

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.