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ving graph shows Eileen's total cost curve. lue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven ) that Eileen produces. Total Revenue Total Cost Profit QUANTITY (Shirts) Eileen's marginal revenue and marginal cost for the first seven shirts she produces, and plot them on the following graph. Use the blue rcle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity. (?)

ving graph shows Eileen's total cost curve. lue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven ) that Eileen produces. Total Revenue Total Cost Profit QUANTITY (Shirts) Eileen's marginal revenue and marginal cost for the first seven shirts she produces, and plot them on the following graph. Use the blue rcle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity. (?)

Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter14: Firms In Competitive Markets
Section: Chapter Questions
Problem 9PA
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Suppose Eileen runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt. The following graph shows Eileen's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven (inclusive) that Eileen produces. 200 175 Total Revenue 150 125 Total Cost Profit 100 50 25 -25 1 3 4 6 7 QUANTITY (Shirts) Calculate Eileen's marginal revenue and marginal cost for the first seven shirts 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 at each quantity. (?) 40 Marginal Revenue Marginal Cost 1. 5 6 7 8 QUANTITY (Shirts) Eileen's profit is maximized when she produces shirts. When she does this, the marginal cost of the last shirt she produces is $ which is v than the price Eileen receives for each shirt she sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize her profit) is $ , which is v than the price Eileen receives for each shirt she sells. Therefore, Eileen's profit- maximizing quantity corresponds to the intersection of the curves. Because Eileen is a price taker, this last condition can also be written as COSTS AND REVENUE (Dollars per shirt) TOTAL COST AND REVENUE (Dollars)
Transcribed Image Text:Suppose Eileen runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt. The following graph shows Eileen's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven (inclusive) that Eileen produces. 200 175 Total Revenue 150 125 Total Cost Profit 100 50 25 -25 1 3 4 6 7 QUANTITY (Shirts) Calculate Eileen's marginal revenue and marginal cost for the first seven shirts 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 at each quantity. (?) 40 Marginal Revenue Marginal Cost 1. 5 6 7 8 QUANTITY (Shirts) Eileen's profit is maximized when she produces shirts. When she does this, the marginal cost of the last shirt she produces is $ which is v than the price Eileen receives for each shirt she sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize her profit) is $ , which is v than the price Eileen receives for each shirt she sells. Therefore, Eileen's profit- maximizing quantity corresponds to the intersection of the curves. Because Eileen is a price taker, this last condition can also be written as COSTS AND REVENUE (Dollars per shirt) TOTAL COST AND REVENUE (Dollars)
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