Suppose Clancy runs a small business that manufactures frying pans. Assume that the market for frying pans is a price-taker market, and the market price is $10 per frying pan.

The following graph shows Clancy 's total cost curve.

Use the blue points (circle symbol) to plot total revenue, and the green points (triangle symbol) to plot profit for the first seven frying pans that Clancy produces, including zero frying pans.

Calculate Clancy '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.

Clancy 's profit is maximized when she produces _______ frying pans. When she does this, the marginal cost of the last frying pan she produces is _______, which is (greater/less) than the price Clancy 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 (greater, less) than the price Clancy receives for each frying pan she sells. Therefore, Clancy 's profit-maximizing quantity corresponds to the intersection of the (total cost and profit/ total cost and revenue/ marginal cost and total revenue/ total revenue and profit/ total cost and marginal revenue/ marginal cost and marginal revenue) curves. Because Clancy is a price taker, this last condition can also be written as (MC = TR / Profit = TR - TC / TC=TR / Profit = MR - MC / P=MC)

TOTAL COST AND REVENUE (Dollars) 125 100 75 50 25 25 -50 0 1 2 D 3 4 5 QUANTITY (Frying pans) 0 Total Cost 6 7 8 Total Revenue Profit ? COSTS AND REVENUE (Dollars per frying pan) 30 25 20 15 10 10 O 4 0 1 2 3 4 5 QUANTITY (Frying pans) 9 7 8 Marginal Revenue Marginal Cost