Question

3. Profit maximization using total cost and total revenue curves Suppose Carlos runs a small business that manufactures teddy bears, Assume that the market for teddy bears is a perfectly competitive market, and the market price is $25 per teddy bear The following graph shows Carlos's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (eriangle symbol) to plot proft for the irst seven tedy bears that Carlos produces, including zero teddy bears 175 150 Total Revenue Total Cost 125 75 50 25 QUANTITY (Teddy bears) the first seven teddy bears he produces and plot them on the following (square symbol) to plot marginal cost. seven s marginal revenue and marginal cost for Calculat graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points Note: Be sure to plot marginal values on the appropriate bear is y, plot a point at (2, y). Line segments will connect automatically whole unit values; for example if the marginal revenue of the second teddy Marginal Revenue

Answer 1

a) 6 teddy bears

b) $ 15; less than

c) $ 30, more than

d) marginal cost and marginal revenue

e) P = MC