3. Profit maximization using total cost and total revenue curvesSuppose Rian operates a handicraft pop-up retail shop that sells rompers. Assume a perfectly competitive market structure for rompers with a marketprice equal to $20 per romper.THThe following graph shows Rian's total cost curve.Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for rompers for quantities zero throughseven (including zero and seven) that Rian produces.TOTAL COST AND REVENUE (Dollars)200175150125100755025-25DO01235QUANTITY (Rompers)46Total Cost78Total RevenueProfit? Calculate Rian's marginal revenue and marginal cost for the first seven rompers they produce, and plot them on the following graph. Use the bluepoints (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity.COSTS AND REVENUE (Dollars per romper)4035302520151001I2an amount35QUANTITY (Rompers)4Rian's profit is maximized when they produce a total of678Marginal RevenueMarginal Cost/rompers. At this quantity, the marginal cost of the final romper they produce isthan the price received for each romper they sell. At this point, the marginal cost of producing one more romperthan the price received for each romper they sell.(the first romper beyond the profit maximizing quantity) is $Therefore, Rian's profit-maximizing quantity occurs at the point of intersection between theBecause Rian is a price taker, the previous condition is equivalent to?an amountcurves.

This can be described as the financial gain of a firm when the TR surpasses the level of the TC…

$ , an amount Rian's profit is maximized when they produce a total of rompers. At this quantity, the marginal cost of the final romper they produce is than the price received for each romper they sell. At this point, the marginal cost of producing one more romper (the first romper beyond the profit maximizing quantity) is $ , an amount than the price received for each romper they sell. Therefore, Rian's profit-maximizing quantity occurs at the point of intersection between the Because Rian is a price taker, the previous condition is equivalent to ▼ curves.

$ , an amount Rian's profit is maximized when they produce a total of rompers. At this quantity, the marginal cost of the final romper they produce is than the price received for each romper they sell. At this point, the marginal cost of producing one more romper (the first romper beyond the profit maximizing quantity) is $ , an amount than the price received for each romper they sell. Therefore, Rian's profit-maximizing quantity occurs at the point of intersection between the Because Rian is a price taker, the previous condition is equivalent to ▼ 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 10SCQ: Explain how the profit-maximizing rule of setting P=MC leads a perfectly competitive market to be...

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