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3. Profit maximization using total cost and total revenue curves Suppose Amari operates a handicraft pop-up retail shop that sells rompers. Assume a perfectly competitive market structure for rompers with a market price equal to $20 per romper. The following graph shows Amari'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 through seven (including zero and seven) that Amari produces. 200 O 175 Total Revenue 150 Total Cost A 125 Profit 100 TOTAL COST AND REVENUE (Dollars) 75 50 25 .25 1 2 3 4 5 6 7 QUANTITY (Rompers)Calculate Amari's marginal revenue and marginal cost for the first seven rompers they produce, 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 O 35 Marginal Revenue 30 25 Marginal Cost COSTS AND REVENUE (Dollars per romper) 20 15 10 2 3 5 6 7 QUANTITY (Rompers) Amari's profit is maximized when they produce a total of rompers. At this quantity, the marginal cost of the final romper they produce is $ , an amount 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, Amari's profit-maximizing quantity occurs at the point of intersection between the curves. Because Amari is a price taker, the previous condition is equivalent toCalculate Amari's marginal revenue and marginal cost for the first seven rompers they produce, 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 O 35 Marginal Revenue 30 25 Marginal Cost COSTS AND REVENUE (Dollars per romper) 20 15 10 2 3 5 6 7 QUANTITY (Rompers) Amari's profit is maximized when they produce a total of rompers. At this quantity, the marginal cost of the final romper they produce is $ , an amount 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, Amari's profit-maximizing quantity occurs at the point of intersection between the curves. Because Amari is a price taker, the previous condition is equivalent to