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 profit, the chair-manufacturing firm should produce where marginal revenue (MR) equals marginal cost (MC) and MC is increasing. At a price of $100, the MR is also equal to $100. Looking at the table, the marginal cost starts increasing from the 30th unit, which means producing 30 units is the most cost-efficient level for this firm. Therefore, the firm should produce 30 units to maximize its profit.

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