11. Profit maximization using total cost and total revenue curves Suppose Crystal runs a small business that manufacture

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11. Profit maximization using total cost and
total revenue curves
Suppose Crystal 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 Crystal'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 Crystal
produces.
Total RevenueProfit0123456782001751501251007550250-25TOTAL COST
AND REVENUE (Dollars)QUANTITY (Frying pans)Total Cost
Calculate Crystal's marginal revenue and marginal cost for
the first seven frying pans she 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.
Marginal RevenueMarginal Cost0123456784035302520151050COSTS AND
REVENUE (Dollars per frying pan)QUANTITY (Frying pans)
Crystal's profit is maximized when she producesfrying pans. When
she does this, the marginal cost of the last frying pan she
produces is, which is than the
price Crystal receives for each frying pan she sells. The marginal
cost of producing an additional frying pan (that is, one more
frying pan than would maximize her profit) is, which
is than the price Crystal
receives for each frying pan she sells. Therefore, Crystal's
profit-maximizing quantity corresponds to the intersection of
the curves. Because Crystal is a
price taker, this last condition can also be written
as .