Suppose she 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. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for teddy bears quantities zero throughseven (inclusive) that Eileen produces.TOTAL COST AND REVENUE (Dollars)200COSTS AND REVENUE (Dolars per teddy bear)17515012510075500-2540353025201550Calculate Eileen's marginal revenue and marginal cost for the first seven teddy bears she produces, and plot them on the following graph. Use the bluepoints (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity.0102145QUANTQUANTITY (Teddy bears)26345QUANTITY (Teddy bears)Tatal Cast67Tatal Revenue7ProfitMarginal RevenueOMarginal CostEileen's profit is maximized when she producesteddy bears. When she does this, the marginal cost of the last teddy bear she produces is, which isthan the price Eileen receives for each teddy bear she sells. The marginal cost of producing an additional teddy bear(that is, one more teddy bear than would maximize her profit) is $ , which isthan the price Eileen receives for each teddy bearshe sells. Therefore, Eileen's profit-maximizing quantity corresponds to the intersection of theBecause Eileen is a price taker, this last condition can also be written ascurves.

A competitive market is characterized by a large number of buyers and sellers, where no single…

Answered: Suppose she runs a small business that…

Suppose she 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.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Cost Of Production

Section: Chapter Questions

Problem 1CQQ

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Question

Suppose she 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.

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 Eileen produces.
TOTAL COST AND REVENUE (Dollars)
200
COSTS AND REVENUE (Dolars per teddy bear)
175
150
125
100
75
50
0
-25
40
35
30
25
20
15
5
0
Calculate Eileen's marginal revenue and marginal cost for the first seven teddy bears 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.
0
1
0
2
1
4
5
QUANT
QUANTITY (Teddy bears)
2
6
3
4
5
QUANTITY (Teddy bears)
Tatal Cast
6
7
Tatal Revenue
7
Profit
Marginal Revenue
O
Marginal Cost
Eileen's profit is maximized when she produces
teddy bears. When she does this, the marginal cost of the last teddy bear she produces is
, which is
than the price Eileen receives for each teddy bear she sells. The marginal cost of producing an additional teddy bear
(that is, one more teddy bear than would maximize her profit) is $ , which is
than the price Eileen receives for each teddy bear
she sells. Therefore, Eileen's profit-maximizing quantity corresponds to the intersection of the
Because Eileen is a price taker, this last condition can also be written as
curves.

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