Suppose Jake 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 Jake'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 Jake produces. (? 200 175 Total Revenue 150 Total Cost 125 Profit 100 75 50 25 -25 1 2 6 7 8. QUANTITY (Frying pans) Calculate Jake's marginal revenue and marginal cost for the first seven frying pans he 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. 40 35 Marginal Revenue 30 25 Marginal Cost 20 15 10 2 3 4 5 . 6. QUANTITY (Frying pans) Jake's profit is maximized when he produces frying pans. When he does this, the marginal cost of the last frying pan he produces is v than the price Jake receives for each frying pan he sells. The marginal cost of producing an additional frying pan , which is (that is, one more frying pan than would maximize his profit) is 5 , which is v than the price Jake receives for each frying pan he sells. Therefore, Jake's profit-maximizing quantity corresponds to the intersection of the v curves. Because Jake is a price taker, this last condition can also be written as TO TAL COSTAND REVENUE (Dollars COSTS AND REVENUE (Dollars per frying pan)
Suppose Jake 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 Jake'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 Jake produces. (? 200 175 Total Revenue 150 Total Cost 125 Profit 100 75 50 25 -25 1 2 6 7 8. QUANTITY (Frying pans) Calculate Jake's marginal revenue and marginal cost for the first seven frying pans he 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. 40 35 Marginal Revenue 30 25 Marginal Cost 20 15 10 2 3 4 5 . 6. QUANTITY (Frying pans) Jake's profit is maximized when he produces frying pans. When he does this, the marginal cost of the last frying pan he produces is v than the price Jake receives for each frying pan he sells. The marginal cost of producing an additional frying pan , which is (that is, one more frying pan than would maximize his profit) is 5 , which is v than the price Jake receives for each frying pan he sells. Therefore, Jake's profit-maximizing quantity corresponds to the intersection of the v curves. Because Jake is a price taker, this last condition can also be written as TO TAL COSTAND REVENUE (Dollars COSTS AND REVENUE (Dollars per frying pan)
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
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Transcribed Image Text:Suppose Jake 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 Jake'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 Jake produces.
200
175
Total Revenue
150
Total Cost
125
Profit
100
75
50
25
-25
1
2
6
8
QUANTITY (Frying pans)
Calculate Jake's marginal revenue and marginal cost for the first seven frying pans he 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.
(?
40
35
Marginal Revenue
30
25
Marginal Cost
20
15
1
2
3
4
5
6.
QUANTITY (Frying pans)
Jake's profit is maximized when he produces
frying pans. When he does this, the marginal cost of the last frying pan he produces is
, which is
v than the price Jake receives for each frying pan he sells. The marginal cost of producing an additional frying pan
(that is, one more frying pan than would maximize his profit) is S
, which is
v than the price Jake receives for each frying pan he
sells. Therefore, Jake's profit-maximizing quantity corresponds to the intersection of the
v curves. Because
Jake is a price taker, this last condition can also be written as
COSTS AND REVENUE (Dollars per frying pan)
O TAL COSTAND REVENUE (Dollars)
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