Gilberto's profit is maximized when he produces 3 shirts. When he does this, the marginal cost of the previous shirt he produces is $10 , which isless than the price Gilberto receives for each shirt he sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize his profit) is $ , which isgreater than the price Gilberto receives for each shirt he sells. Therefore, Gilberto's profit-maximizing quantity corresponds to the intersection of themarginal cost and marginal revenue curves. Because Gilberto is a price taker, this last condition can also be written as P=MC .

Explanation:

Profit is maximized at the production point of four tops. The disparity in net income and net expenditure is highest in this amount.

Another way of talking about this is to note that for the first 4 shirts that Gilberto makes, the marginal cost (MC) of making each shirt is smaller than the total revenue (MR) it generates from selling the shirt.

Beyond just the third shirt he makes per hour, the total cost of making the shirt is higher than the amount Gilberto receives; thus, opting to manufacture more than 4 shirts decreases Darnell's benefit.

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answer; signaling;