, an amount Madison's profit is maximized when they produce a total of 5 phone cases. At this quantity, the marginal cost of the final phone case they produce is $ than the price received for each phone case they sell. At this point, the marginal cost of producing one more phone case (the first phone case beyond the profit maximizing quantity) is $ , an amount than the price received for each phone case they sell. Therefore, Madison's profit-maximizing quantity occurs at the point of intersection between the curves. Because Madison is a price taker, the previous condition is equivalent to
, an amount Madison's profit is maximized when they produce a total of 5 phone cases. At this quantity, the marginal cost of the final phone case they produce is $ than the price received for each phone case they sell. At this point, the marginal cost of producing one more phone case (the first phone case beyond the profit maximizing quantity) is $ , an amount than the price received for each phone case they sell. Therefore, Madison's profit-maximizing quantity occurs at the point of intersection between the curves. Because Madison is a price taker, the previous condition is equivalent to
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter5: Investment Decisions: Look Ahead And Reason Back
Section: Chapter Questions
Problem 5.6IP
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