\f4. Total cost, average 2051:,r and marginal cost in the short run Suppose Kevin runs a small business that manufactures frying pans. Assume mat the market for frying pans is a pricetaker market, and the market price is $20 per frying pan. 111e following graph shows Kevin's total cost curve. Use the blue points (circle ember) to plot total revenue, and the green points (triangle symbol) to plot prot for the rst seven frying pans that Kevin produces, including zero frying pans. Calculate Kevin'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. 40 O 35 Marginal Revenue 30 25 Marginal Cost 20 COSTS AND REVENUE (Dollars per frying pan) 15 10 5 1 2 3 4 5 6 7 8 QUANTITY (Frying pans)Kevin's prot is maximized when he produces frying pans. When he does this. the marginal cost of the last frying pan he produces is . which is 7 than the price Kevin 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 prot) is , which is v than the price Kevin receives for each frying pan he sells. Therefore, Kevin's protmaximizing quantity corresponds to the intersection of the 7 curves. Because Kevin is a price taker, this last condition can also be written as v . Kevin's prot is maximized when he produces Shim; pans. When he does this, we marginal cost of the last fnring pan he produces is . which is 7 than the price Kevin receives for each frying pan he sells. The marginal cost of producing an additional frying pan an would maximize his prot) is , which is 7 than the price Kevin receives for each frying pan he aximizing quantity corresponds to the intersection of the V curves. {that is, one more f sells. Therefore. Ke Because Kevin is a p his last condition can also be written as v . \"J 5 total cost and marginal revenue o 1 2 a 4 5 o 7 a, marginal cost and total revenue QUANTITY [Frying pans) COSTSA total cost and total revenue marginal cost and marginal revenue Kevin's prot is maximized when he produces Chang pans. when he does this, th total cost and prot - produces is , which is v than the price Kevin receives for each frying pan he sel total revenue and rot dditional frying pan [that is, one more frying pan than would maximize his prot) is , which is p -r each frying pan he sells. Therefore, Kevin's protmaximizing quantity corresponds to the intersection of the V curves. Because Kevin is a price taker, this last condition can also be written as v