Thank you 4. Profit maximization with a cost table AaAa Suppose Yvonne runs a sm

Question

Thank you 4. Profit maximization with a cost table AaAa Suppose Yvonne runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market and the market price is $25 per shirt. The following table represents Yvonne's cost structure per hour: Output Total Cost (Shirts) (Dollars) 0 15 25 30 40 75 105 150 7 If Yvonne produces and sells three shirts, her total revenue (TR) would be $75 and her profit would be ,and her marginal cost $25 $35 Yvonne's marginal revenue (MR) from the third shirt she sells is (MC) of producing a third shirt is $10_ The following graph presents Yvonne's total cost (based on the previous table). Use the blue points (circle symbols) to plot total revenue and the green points (triangle symbols) to plot profit for the first seven shirts that Yvonne produces. Line segments will automatically connect the points Hint: You will have to plot eight points for each line. Remember to plot the points from left to right. COST, REVENUE, AND PROFIT (Dollarsl Total Revenue 200 175 150 125 100 75 50 Cost

Explanation / Answer

The marginal cost of producing an additional shirt (six shirts) would be $30 which is more than the price Yvonne receives for each shirt that she sells. Therefore, profit-maximizing quantity corresponds to the interaction of the marginal cost and marginal revenue.

Output (Shirts) Total Cost (Dollars) Total Revenue $ (P x Q) MR $ MC $ Profit (TR_TC) 0 15 0 - - -15 1 25 25 25 10 0 2 30 50 25 5 20 3 40 75 25 10 35 4 55 100 25 15 45 5 75 125 25 20 50 6 105 150 25 30 45 7 150 175 25 45 25

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