11. Profit maximization using total cost and total revenue curves Suppose Eric 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 Eric'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 Eric produces. 200 O 175 Total Revenue 150 Total Cost A 125 O Profit 100 TOTAL COST AND REVENUE (Dollars) 75 50 25 0 25 2 3 5 6 7 QUANTITY (Frying pans)Calculate Eric's marginal revenue and marginal cost for the first seven frying pans he 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. 40 O 35 Marginal Revenue 30 25 Marginal Cost COSTS AND REVENUE (Dollars per frying pan) 20 15 10 Cn 2 7 QUANTITY (Frying pans) Eric's profit is maximized when he produces frying pans. When he does this, the marginal cost of the last frying pan he produces is $ , which is than the price Eric receives for each frying pan he sells. The marginal cost of producing an additional frying pan (that is, one more frying pan than would maximize his profit) is |$ , which is than the price Eric receives for each frying pan he sells. Therefore, Eric's profit-maximizing quantity corresponds to the intersection of the curves. Because Eric is a price taker, this last condition can also be written as