The schedule of total costs for a chair-manufacturing firm is presented in the table below.If the market price of chairs is $100,which of the output levels should this price-taker firm produce in order to maximize profit?

Question

Quizplus · Accepted Answer

To maximize profits, the firm should produce where marginal revenue (MR) equals marginal cost (MC).
At an output level of 30, the marginal cost is $80, and the marginal revenue is $100. This means that the firm is producing at a level where it can gain a profit of $20 per unit. At any other output level, the marginal cost will be higher than the marginal revenue, which means that producing that extra unit will result in a lower profit. Therefore, the profit-maximizing output level is 30.

The Schedule of Total Costs for a Chair-Manufacturing Firm Is