11. Profit maximization using total cost and total revenue curves Suppose Madison operates a handicraft pop-up retail shop that sells phone cases. Assume a perfectly competitive market structure for phone cases with a market price equal to $20 per phone case. The following graph shows Madison's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for phone cases for quantities zero through seven (including zero and seven) that Madison produces.200 O 175 Total Revenue 150 A 125 Total Cost Profit 100 TOTAL COST AND REVENUE (Dollars) 75 50 0 25 -25 1 2 3 4 5 6 7 QUANTITY (Phone cases)Calculate Madison's marginal revenue and marginal cost for the first seven phone cases 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. 40 O 35 Marginal Revenue 30 -0 25 Marginal Cost COSTSAND REVENUE (Dollars per phone case) 20 15 10 1 2 3 4 5 6 7 CO QUANTITY (Phone cases)Madison's profit is maximized when they produce a total of phone cases. At this quantity, the marginal cost of the final phone case they produce is $ , an amount than the price received for each phone case they sell. At this point, the marginal cost of producing one more phone case (the first phone case beyond the profit maximizing quantity) is $ an amount than the price received for each phone case they sell. Therefore, Madison's profit-maximizing quantity occurs at the point of intersection between the curves. Because Madison is a price taker, the previous condition is equivalent toMadison's profit is maximized when they produce a total of produce is an amount than the price rece more phone case (the first phone d the profit maximizin phone case they sell. Therefore, M greater ofit-maximizing quant less curves. Because Madgreater quantity, the m st of the final phone case the less ase they sell. At the marginal cost of produci an amount than the price received fo of intersection between the he previous condition is equivalent tomarginal cost and total revenue 5 6 7 marginal cost and marginal revenue ne cases) total cost and total revenue total cost and profit produce a total of total cost and marginal revenue than the p beyond the profit m total revenue and profit n's profit-maximizin curves. BecaP = MC TO = TR Profit = TR - TC al cost of the point, the mar Profit = MR - MC e than t MC = TR en the is equivalent to