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 output should this price-taker firm produce to maximize profit?

Question

Quizplus · Accepted Answer

To maximize profit, a firm should produce at the output where marginal revenue equals marginal cost. 
At an output of 300 chairs, the firm's marginal cost is $80, and its marginal revenue (the market price) is $100. Therefore, producing 300 chairs will maximize the firm's profit, which is calculated as the difference between total revenue and total cost. 
At an output of 200 chairs, the firm's marginal cost is $60, which is less than the market price of $100. This means the firm could increase its profit by producing more chairs.  
At an output of 400 chairs, the firm's marginal cost is $120, which is greater than the market price of $100. This means the firm would incur losses by producing more chairs. 
At an output of 500 chairs, the firm's total cost is $51,000, which is greater than its total revenue of $50,000. This means the firm would also incur losses by producing more chairs.

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