Calculate Dmitri's marginal revenue and marginal cost for the first seven teddy bears 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 35 Marginal Revenue 30 25 Marginal Cost COSTS AND REVENUE (Dollars per teddy bear) 20 15 10 5 0 2 3 5 6 7 QUANTITY (Teddy bears)seven (inclusive) that Dmitri produces. 200 175 Total Revenue 150 Total Cost A 125 Profit 100 TOTAL COST AND REVENUE (Dollars) 75 50 25 0 -25 0 2 3 4 5 6 7 8 QUANTITY (Teddy bears)30 25 Marginal Cost 20 COSTS AND REVENUE ( Dollars per tedd 15 10 5 2 3 5 6 7 8 QUANTITY (Teddy bears) Dmitri's profit is maximized when he produces 4 teddy bears. When he does this, the marginal cost of the last teddy bear he produces is $15 , which is less than the price Dmitri receives for each teddy bear he sells. The marginal cost of producing an additional teddy bear (that is, one more teddy bear than would maximize his profit) is $25 , which is greater * than the price Dmitri receives for each teddy bear he sells. Therefore, Dmitri's profit-maximizing quantity corresponds to the intersection of the marginal cost and marginal revenue curves. Because Dmitri is a price taker, this last condition can also be written as P = MC11. Profit maximization using total cost and total revenue curves Suppose Dmitri runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $20 per teddy bear. The following graph shows Dmitri's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for teddy bears quantities zero through seven (inclusive) that Dmitri produces. 200 175 Total Revenue 150 Total Cost 125 Profit 100 L COST AND REVENUE (Dollars) 75 50