Suppose Raphael runs a small business that manufactures frying pans. Assume that the market for frying...

 

  

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Suppose Raphael runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan. The following graph shows Raphael's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for frying pans quantities zero through seven (inclusive) that Raphael produces. 200 175 Total Revenue 150 125 Total Cost Profit 100 75 50 -25 2 6 7 QUANTITY (Frying pans) TOTAL COST AND REVENUE (Dollars) Calculate Raphael's marginal revenue and marginal cost for the first seven frying pans 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 at each quantity. (? 40 35 Marginal Revenue 30 25 Marginal Cost 15 10 1 2 5 6 8 QUANTITY (Frying pans) Raphael's profit is maximized when he produces frying pans. When he does this, the marginal cost of the last frying pan he produces is , which is v than the price Raphael receives for each frying pan he sells. The marginal cost of producing an additional frying pan (that is, one more frying pan than would maximize his profit) is $ , which is v than the price Raphael receives for each frying pan he sells. Therefore, Raphael's profit-maximizing quantity corresponds to the intersection of the curves. Because Raphael is a price taker, this last condition can also be written as COSTS AND REVENUE (Dollars per frying pan) Suppose Raphael runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan. The following graph shows Raphael's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for frying pans quantities zero through seven (inclusive) that Raphael produces. 200 175 Total Revenue 150 125 Total Cost Profit 100 75 50 -25 2 6 7 QUANTITY (Frying pans) TOTAL COST AND REVENUE (Dollars) Calculate Raphael's marginal revenue and marginal cost for the first seven frying pans 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 at each quantity. (? 40 35 Marginal Revenue 30 25 Marginal Cost 15 10 1 2 5 6 8 QUANTITY (Frying pans) Raphael's profit is maximized when he produces frying pans. When he does this, the marginal cost of the last frying pan he produces is , which is v than the price Raphael receives for each frying pan he sells. The marginal cost of producing an additional frying pan (that is, one more frying pan than would maximize his profit) is $ , which is v than the price Raphael receives for each frying pan he sells. Therefore, Raphael's profit-maximizing quantity corresponds to the intersection of the curves. Because Raphael is a price taker, this last condition can also be written as COSTS AND REVENUE (Dollars per frying pan)

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Q TC TR Profit MC MR 0 15 0 15 1 30 20 ... View the full answer