11. Profit maximization using total cost and total revenue curves Suppose Jayden operates a handicraft pop-up retail shop that sells cardigans. Assume a perfectly competitive market structure for cardigans with a market price equal to $25 per cardigan. The following graph shows Jayden's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot prot for cardigans for quantities zero through seven (including zero and seven ) that Jayclen produces. 200 O 175 Total Revenue 150 Total Cost A 125 El Profit 100 U'i w O or TOTAL COST AND REVENUE (Dollars) M U! 725 U 1 2 3 4 5 E 7 8 QUANTITY (Cardigans) Calculate Jayden's marginal revenue and marginal cost for the first seven cardigans they produce, 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. @ 4o 0 35 Marginal Revenue 30 El 25 Marginal Cost 20 15 1O COSTS AND REVENUE (Dollars per cardigan) U 1 2 3 4 5 6 7 8 QUANTITY (Cardigans) Jayden's profit is maximized when they produce a total of C] cardigans. At this quantity, the marginal cost of the final cardigan they produce is , an amount V than the price received for each cardigan they sell. At this point, the marginal cost of producing one more cardigan (the first cardigan beyond the prot maximizing quantity) is -, an amount V than the price received for each cardigan they sell. Therefore, Jayden's profit-maximizing quantity occurs at the point of intersection between the V curves. Because Jayden is a price taker, the previous condition is equivalent to V