Answered: Suppose Jayden operates a handicraft…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Suppose Jayden 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 Jayden's total cost curve.

Jayden'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 ( greater or less)than the price received for each phone case they sell. At this point, the marginal cost of producing one more phone case (the first phone case beyond the profit maximizing quantity) is ____, an amount(greater or less)than the price received for each phone case they sell.

Calculate the marginal revenue and marginal cost for the first seven phone cases they produce, and plot them on the following graph. Use the blue points to plot marginal revenue and the orange points to plot marginal cost at each quantity.

COSTS AND REVENUE (Dollars per phone case)
40
35
30
25
20
15
10
5
0
0
1
2
3
4
5
QUANTITY (Phone cases)
6
7
8
Marginal Revenue
Marginal Cost

TOTAL COST AND REVENUE (Dollars)
200
175
150
125
100
75
50
25
O
-25
☐
0
C
1
■
2
U
0
3
4
5
QUANTITY (Phone cases)
□
6
Total Cost
0
7
8
Total Revenu
Profit

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