Suppose Felix 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 Felix'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 Felix produces.
Suppose Felix 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 Felix'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 Felix produces.
Chapter23: Profit Maximization
Section: Chapter Questions
Problem 1E
Related questions
Question
![Suppose Felix 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 Felix'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 Felix produces.
TOTAL COST AND REVENUE (Dollars)
200
175
150
125
100
75
50
25
0
-25
0
1
●
^
2
O
☐
A
☐
A
3
4
5
QUANTITY (Frying pans)
O
☐
6
Total Cost
☐
7
8
o
Total Revenue
Profit
?
image 1
Calculate Felix'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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdbe85a92-3da7-404f-b729-852776999327%2F7779300f-81a2-49a2-85bc-ce03ae064776%2Fx47ork6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose Felix 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 Felix'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 Felix produces.
TOTAL COST AND REVENUE (Dollars)
200
175
150
125
100
75
50
25
0
-25
0
1
●
^
2
O
☐
A
☐
A
3
4
5
QUANTITY (Frying pans)
O
☐
6
Total Cost
☐
7
8
o
Total Revenue
Profit
?
image 1
Calculate Felix'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.
![Calculate Felix'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.
COSTS AND REVENUE (Dollars per frying pan)
40
35
30
25
20
15
10
5
0
0
1
2
3
5
QUANTITY (Frying pans)
4
6
7
8
Marginal Revenue
Marginal Cost
(?)
image 2
Felix's profit is maximized when he produces
which is
frying pans. When he does this, the marginal cost of the last frying pan he produces is
than the price Felix 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
than the price Felix receives for each frying pan he sells.
Therefore, Felix's profit-maximizing quantity corresponds to the intersection of the
curves. Because Felix
is a price taker, this last condition can also be written as](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdbe85a92-3da7-404f-b729-852776999327%2F7779300f-81a2-49a2-85bc-ce03ae064776%2F4us8hor_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Calculate Felix'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.
COSTS AND REVENUE (Dollars per frying pan)
40
35
30
25
20
15
10
5
0
0
1
2
3
5
QUANTITY (Frying pans)
4
6
7
8
Marginal Revenue
Marginal Cost
(?)
image 2
Felix's profit is maximized when he produces
which is
frying pans. When he does this, the marginal cost of the last frying pan he produces is
than the price Felix 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
than the price Felix receives for each frying pan he sells.
Therefore, Felix's profit-maximizing quantity corresponds to the intersection of the
curves. Because Felix
is a price taker, this last condition can also be written as
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