2 . Profit maximization using total cost and total revenue curves

Suppose Paolo runs a small business that manufactures frying pans. Assume that the market for frying pans is a perfectly competitive market, and the market price is $20 per frying pan.

The following graph shows Paolo'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 Paolo produces, including zero frying pans.

Note: Points will snap to the quantities of output as well as level of profit and revenue.

40 O 35 Marginal Revenue 30 25 Marginal Cost COSTS AND REVENUE (Dollars per frying pan) 20 15 10 5 0 0 2 3 4 5 6 7 QUANTITY (Frying pans)200 O 175 Total Revenue 150 Total Cost 125 Profit 100 TOTAL COST AND REVENUE (Dollars) 75 50 25 -25 0 1 2 3 4 5 6 7 8 QUANTITY (Frying pans)