Suppose Eleanor runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and themarket price is $20 per teddy bear.The following graph shows Eleanor's total cost curve.Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for teddy bears quantities zero throughseven (inclusive) that Eleanor produces.200175Total Revenue150Total Cost125Profit100755025-2512378QUANTITY (Teddy bears)TOTAL COST AND REVENUE (Dollars) Calculate Eleanor's marginal revenue and marginal cost for the first seven teddy bears she produces, and plot them on the following graph. Use theblue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity.4035Marginal RevenueMarginal Cost15123578QUANTITY (Teddy bears)Eleanor's profit is maximized when she producesteddy bears. When she does this, the marginal cost of the last teddy bear she produces is, which isv than the price Eleanor receives for each teddy bear she sells. The marginal cost of producing an additional teddybear (that is, one more teddy bear than would maximize her profit) is S|, which isv than the price Eleanor receives for each teddybear she sells. Therefore, Eleanor's profit-maximizing quantity corresponds to the intersection of thev curves. Because Eleanor is a price taker, this last condition can also be written asCOSTS AND REVENUE (Dollars per teddy bear)은

The profit earned by a firm operating in a competitive market is the difference between the total…

Suppose Eleanor runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $20 per teddy bear. The following graph shows Eleanor's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for teddy bears quantities zero through seven (inclusive) that Eleanor produces. (?) 200 175 Total Revenue 150 Total Cost 125 Profit 100 75 50 -25 1 2 QUANTITY (Teddy bears) TOTAL COST AND REVENUE (Dollars)

Suppose Eleanor runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $20 per teddy bear. The following graph shows Eleanor's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for teddy bears quantities zero through seven (inclusive) that Eleanor produces. (?) 200 175 Total Revenue 150 Total Cost 125 Profit 100 75 50 -25 1 2 QUANTITY (Teddy bears) TOTAL COST AND REVENUE (Dollars)

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Firms In Competitive Markets

Section: Chapter Questions

Problem 10PA

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