3. Profit maximization using total cost and total revenue curves Suppose Iyana operates a handicraft pop-up retail shop that sells cardigans. Assume a perfectly competitive market structure for cardigans with a market price equal to $20 per cardigan. The following graph shows Iyana's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for cardigans for quantities zero through seven (including zero and seven) that Iyana produces. Iyana's profit is maximized when they produce a total of cardigans. At this quantity, the marginal cost of the final cardigan they produce is $ , an amount than the price received for each cardigan they sell. At this point, the marginal cost of producing one more cardigan (the first cardigan beyond the profit maximizing quantity) is $ , an amount than the price received for each cardigan they sell. Therefore, Iyana's profit-maximizing quantity occurs at the point of intersection between the curves. Because Iyana is a price taker, the previous condition is equivalent to .
Iyana's profit is maximized when they produce a total of ___cardigans. At this quantity, the marginal cost of the final cardigan they produce is, an amount greater/less than the price received for each cardigan they sell. At this point, the marginal cost of producing one more cardigan (the first cardigan beyond the profit maximizing quantity) is, an amount greater/less than the price received for each cardigan they sell. Therefore, Iyana's profit-maximizing quantity occurs at the point of intersection between the