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3. Profit maximization using total cost and total revenue curves Suppose Kenji 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 Kenji'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 Kenji produces. 200 175 Total Revenue 150 Total Cost 125 Profit 100 -25 TOTAL COST AND REVENUE (Dollars)

3. Profit maximization using total cost and total revenue curves Suppose Kenji 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 Kenji'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 Kenji produces. 200 175 Total Revenue 150 Total Cost 125 Profit 100 -25 TOTAL COST AND REVENUE (Dollars)

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Firms In Competitive Markets
Section: Chapter Questions
Problem 4CQQ
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3. Profit maximization using total cost and total revenue curves Suppose Kenji 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 Kenji'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 Kenji produces. 200 175 Total Revenue 150 Total Cost 125 Profit 100 -25 1 2. TOTAL COST AND REVENUE (Dollars)
Transcribed Image Text:3. Profit maximization using total cost and total revenue curves Suppose Kenji 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 Kenji'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 Kenji produces. 200 175 Total Revenue 150 Total Cost 125 Profit 100 -25 1 2. TOTAL COST AND REVENUE (Dollars)
(circie symboI) to plot marginal revenue and the orange points (square symbol) to piot marginal cost at each quantity. 40 35 Marginal Revenue Marginal Cost 2 3 4 6 7 8 QUANTITY (Shirts) Kenji'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 Kenji 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 Kenji receives for each shirt he sells. Therefore, Kenji's profit-maximizing quantity corresponds to the intersection of the curves. Because Kenji is a price taker, this last condition can also be written as COSTS AND REVENUE (Dollars per shirt)
Transcribed Image Text:(circie symboI) to plot marginal revenue and the orange points (square symbol) to piot marginal cost at each quantity. 40 35 Marginal Revenue Marginal Cost 2 3 4 6 7 8 QUANTITY (Shirts) Kenji'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 Kenji 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 Kenji receives for each shirt he sells. Therefore, Kenji's profit-maximizing quantity corresponds to the intersection of the curves. Because Kenji is a price taker, this last condition can also be written as COSTS AND REVENUE (Dollars per shirt)
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