Suppose Megan runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $25 per teddy bear. The following graph shows Megan'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 teddy bears that Megan produces, including zero teddy bears. TOTAL COST AND REVENUE (Dollars) 200 COSTS AND REVENUE (Dollars per teddy bear) 175 150 125 100 75 50 25 0 -25 S 35 30 20 20 5 10 n 5 0 1 0 2 Calculate Megan's marginal revenue and marginal cost for the first seven teddy bears she 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. 1 D 2 3 4 5 QUANTITY (Teddy bears) 0 3 4 5 QUANTITY (Teddy bears) 6 Total Cost 6 7 8 7 Total Revenue 8 Profit O ? Marginal Revenue -O Marginal Cost Megan's profit is maximized when she produces teddy bears. When she does this, the marginal cost of the last teddy bear she produces is than the price Megan receives for each teddy bear she sells. The marginal cost of producing an additional teddy bear (that is, one more teddy bear than would maximize her profit) is $ ], which is than the price Megan receives for each teddy bear which is she sells. Therefore, Megan's profit-maximizing quantity corresponds to the Intersection of the Because Megan is a price taker, this last condition can also be written as curves.
Suppose Megan runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $25 per teddy bear. The following graph shows Megan'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 teddy bears that Megan produces, including zero teddy bears. TOTAL COST AND REVENUE (Dollars) 200 COSTS AND REVENUE (Dollars per teddy bear) 175 150 125 100 75 50 25 0 -25 S 35 30 20 20 5 10 n 5 0 1 0 2 Calculate Megan's marginal revenue and marginal cost for the first seven teddy bears she 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. 1 D 2 3 4 5 QUANTITY (Teddy bears) 0 3 4 5 QUANTITY (Teddy bears) 6 Total Cost 6 7 8 7 Total Revenue 8 Profit O ? Marginal Revenue -O Marginal Cost Megan's profit is maximized when she produces teddy bears. When she does this, the marginal cost of the last teddy bear she produces is than the price Megan receives for each teddy bear she sells. The marginal cost of producing an additional teddy bear (that is, one more teddy bear than would maximize her profit) is $ ], which is than the price Megan receives for each teddy bear which is she sells. Therefore, Megan's profit-maximizing quantity corresponds to the Intersection of the Because Megan is a price taker, this last condition can also be written as curves.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter8: Perfect Competition
Section: Chapter Questions
Problem 39P: The AAA Aquarium Co. sells aquariums for 20 each. Fixed costs of production are 20. The total...
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