Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the table below. $$\begin{array} { | c | c | }
\hline \begin{array} { c }
\text { Number of } \
\text { Mugs Per Day }
\end{array} & \begin{array} { c }
\text { Total Cost } \
\text { Per Day }
\end{array} \
\hline 0 & \$ 10 \
\hline 1 & \$ 14 \
\hline 2 & \$ 19 \
\hline 3 & \$ 25 \
\hline 4 & \$ 32 \
\hline 5 & \$ 40 \
\hline 6 & \$ 49 \
\hline
\end{array}$$ If the market for mugs is perfectly competitive, and mugs sell for $7.50 each, then at his profit-maximizing level of output, Chris will earn a ______ of ______ per day.

Question

Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the table below. $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Number of } \
\text { Mugs Per Day }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { Per Day }
\end{array} \
\hline 0 & \$ 10 \
\hline 1 & \$ 14 \
\hline 2 & \$ 19 \
\hline 3 & \$ 25 \
\hline 4 & \$ 32 \
\hline 5 & \$ 40 \
\hline 6 & \$ 49 \
\hline
\end{array}$$ If the market for mugs is perfectly competitive, and mugs sell for $7.50 each, then at his profit-maximizing level of output, Chris will earn a ______ of ______ per day.

Quizplus · Accepted Answer

Chris's profit-maximizing output is where marginal cost equals marginal revenue. The marginal cost for each additional mug is $4, $5, $6, $7, $8, and $9, respectively. Since the price is $7.50, Chris will produce 4 mugs (where MC is closest to $7.50 without exceeding it). Total revenue for 4 mugs is $30, and total cost is $32, resulting in a loss of $2.

Suppose Chris Is a Potter Who Makes Mugs If the Market for Mugs Is Perfectly Competitive, and Mugs