Question

Suppose Amari operates a handicraft pop-up retail shop that sells rompers. Assume a perfectly competitive market structure for rompers with a market price equal to $25 per romper. The following graph shows Amari's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for rompers for quantities zero through seven (including zero and seven) that Amari produces.

Answer 1

In a perfectly competitive market, total revenue is equal to the market price multiplied by the quantity sold. Profit is calculated by subtracting total costs from total revenue.

In a perfectly competitive market structure, Amari's total revenue will be equal to the market price multiplied by the quantity of rompers sold.

To plot total revenue, we can use the blue points on the graph.

Total revenue will increase as the quantity of rompers produced and sold increases.

The profit can be calculated by subtracting total cost from total revenue.

To plot profit, we can use the green points on the graph.

Profit will be positive when total revenue exceeds total cost.