# Assume that the market for shirts is a c Show more Suppose Sam runs a small business that manufactures shirts

Suppose Sam runs a small business that manufactures shirts. Assume that the market for shirts is a c Show more Suppose Sam runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market and the market price is $20 per shirt. The following graph shows Sams total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven shirts that Sam produces including zero shirts. Calculate Sams marginal revenue and marginal cost for the first seven shirts he produces and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost. 1) Sams profit is maximized when he produces (____) shirts. 2) When he does this the marginal cost of the last shirt he produces is ($_____) which is (greater/ less?) than the price Sam receives for each shirt he sells. 3)The marginal cost of producing an additional shirt (that is one more shirt than would maximize his profit) is ($______) which is (greater/ less?) than the price Sam receives for each shirt he sells. 4) Therefore Sams profit-maximizing quantity corresponds to the intersection of the ___________ curves. a) total cost and marginal revenue b) marginal cost and total revenue c) total cost and total revenue d) total revenue and profit e) total cost and profit 5) Because Sam is a price taker this last condition can also be written as _________. a) profit = MR- MC b) TC = TR c) MC = TR d) profit = TR TC e) P = MC Show less

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