Suppose Yvette 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 Yvette'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 Yvette produces. 200 O 175 Total Revenue 150 Total Cost A 125 Profit 100 TOTAL COST AND REVENUE (Dollars) 75 50 0 25 O -25 1 2 3 5 6 7 8 QUANTITY (Frying pans)Calculate Yvette's marginal revenue and marginal cost for the first seven frying pans she 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 -O 25 Marginal Cost COSTS AND REVENUE (Dollars per frying pan) 20 15 10 0 3 6 7 8 QUANTITY (Frying pans) Yvette's profit is maximized when she produces frying pans. When she does this, the marginal cost of the last frying pan she produces isgreater Yvette's profit is maximized when she produces frying pans. When she does marginal cost of the last frying pan she produces is less $ , which is than the price Yvette receives for each frying pan The marginal cost of producing an additional frying pan (that is, one more frying pan than would maximize her profit) is $ which is than the price Yvette receives for each frying panCOSTS ll 9' total cost and marginal revenue o 1 2 3 4 5 5 3r 5 tota! revenue and profit QUANTITY {Frying pans} marginal cost and marginal revenue Wette's prot is maximized when she produces E frying pans. when she does this, the , which is V than the price Wette receives for ead'i frying pan she sells. (that is, one more frying pan than would maximize her prot) is , which is she sells. Therefore, Wette's prot-maximizing quantity corresponds to the intersection of the 7 curves. 0 2 3 4 5 6 7 8 QUANTITY (Frying pans) Profit = TR - TC Profit = MR - MC TC = TR Yvette's profit is maximized when she produces frying pans. Wh marginal cost of the last frying pan she produces is $ , which is than the price Yvette receives for each MC = TR The marginal cost of producing an additional frying pan (that is, one more frying pan than would maximize her profit) is | $ than the price Yvette receives for each frying pan P = MC she sells. Therefore, Yvette's profit-maximizing quantity corresponds to curves. Because Yvette is a price taker, this last condition can also be written as