Suppose Gilberto runs a small business that manufactures shirts. Assume that the market for shirts is a price-taker market, and the market price is $10 per shirt. The following graph shows Gilberto's total cost curve. Use the blue points (circle symbol) to plot total revenue, and the green points (triangle symbol) to plot profit for the first seven shirts that Gilberto produces, including zero shirts. 125 100 8 TOTAL COST AND REVENUE (Dollars) -60 30 8 COSTS AND REVENUE (Dollars per shirt) 50 15 1 10 2 1 2 □ 5 QUANTITY (Shirts) Calculate Gliberto's marginal revenue and marginal cost for the first seven shirts 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. 3 5 QUANTITY (Shirts) 6 Gilberto's profit is maximized when he produces Total Cost 6 7 7 8 is would maximize his profit) is S which is maximizing quantity corresponds to the intersection of the last condition can also be written as Total Revenue 8 Profit which shirts. When he does this, the marginal cost of the last shirt he produces is $ than the price Gilberto receives for each shirt he sells. The marginal cost of producing an additional shirt (that is, one more shirt than than the price Gilberto receives for each shirt he sells. Therefore, Gilberto's profit- curves. Because Gilberto is a price taker, this = Marginal Revenue -0- Marginal Cost
Suppose Gilberto runs a small business that manufactures shirts. Assume that the market for shirts is a price-taker market, and the market price is $10 per shirt. The following graph shows Gilberto's total cost curve. Use the blue points (circle symbol) to plot total revenue, and the green points (triangle symbol) to plot profit for the first seven shirts that Gilberto produces, including zero shirts. 125 100 8 TOTAL COST AND REVENUE (Dollars) -60 30 8 COSTS AND REVENUE (Dollars per shirt) 50 15 1 10 2 1 2 □ 5 QUANTITY (Shirts) Calculate Gliberto's marginal revenue and marginal cost for the first seven shirts 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. 3 5 QUANTITY (Shirts) 6 Gilberto's profit is maximized when he produces Total Cost 6 7 7 8 is would maximize his profit) is S which is maximizing quantity corresponds to the intersection of the last condition can also be written as Total Revenue 8 Profit which shirts. When he does this, the marginal cost of the last shirt he produces is $ than the price Gilberto receives for each shirt he sells. The marginal cost of producing an additional shirt (that is, one more shirt than than the price Gilberto receives for each shirt he sells. Therefore, Gilberto's profit- curves. Because Gilberto is a price taker, this = Marginal Revenue -0- Marginal Cost
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter5: Investment Decisions: Look Ahead And Reason Back
Section: Chapter Questions
Problem 5.6IP
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