Amari's profit is maximized when they produce a total of phone cases. At this quantity, the marginal cost of the final phone case they produce is $ an amount than the price received for each phone case they sell. At this point, the marginal cost of producing one an amount than the price received for each more phone case (the first phone case beyond the profit maximizing quantity) is 5, phone case they sell. Therefore, Amari's profit-maximizing quantity occurs at the point of intersection between the curves. Because Amari is a price taker, the previous condition is equivalent to
Amari's profit is maximized when they produce a total of phone cases. At this quantity, the marginal cost of the final phone case they produce is $ an amount than the price received for each phone case they sell. At this point, the marginal cost of producing one an amount than the price received for each more phone case (the first phone case beyond the profit maximizing quantity) is 5, phone case they sell. Therefore, Amari's profit-maximizing quantity occurs at the point of intersection between the curves. Because Amari is a price taker, the previous condition is equivalent to
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
Chapter10: The Firm And The Industry Under Perfect Competition
Section: Chapter Questions
Problem 2DQ
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Question
Transcribed Image Text:Suppose Amari operates a handicraft pop-up retail shop that sells phone cases. Assume a perfectly competitive market structure for phone cases with
a market price equal to $20 per phone case.
The following graph shows Amari's total cost curve.
Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for phone cases for quantities zero
through seven (including zero and seven) that Amari produces.
TOTAL COST AND REVENUE (Dollars)
200
150
125
100
75
50
25
0
0
O Search
Total Cost
20
Total Revenue
Profit
C
Ccc
U
Transcribed Image Text:Suppose Amari operates a handicraft pop-up retail shop that sells phone cases. Assume a perfectly competitive market structure for phone cases with
a market price equal to $20 per phone case.
The following graph shows Amari's total cost curve.
Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for phone cases for quantities zero
through seven (including zero and seven) that Amari produces.
TOTAL COST AND REVENUE (Dollars)
200
150
125
100
75
50
25
0
0
O Search
Total Cost
20
Total Revenue
Profit
C
Ccc
U
Expert Solution
Step 1
Total cost refers to the total amount of expense incurred during the production process. It includes both fixed and variable costs, where the fixed cost remains fixed throughout the production process and the variable cost changes with each unit of production. On the other hand, total revenue refers to the revenue received by selling units of goods. The concepts of total revenue and total cost are important in determining a firm's profit.
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