The table given below shows the total revenue and total cost of a firm at different levels of output. Table 9.2

- Consider the perfectly competitive firm described in Table 9.2.How much profit will the firm make if it is a profit maximizer?

Question

The table given below shows the total revenue and total cost of a firm at different levels of output. Table 9.2

- Consider the perfectly competitive firm described in Table 9.2.How much profit will the firm make if it is a profit maximizer?

Quizplus · Accepted Answer

To find the profit-maximizing level of output, we need to compare the marginal revenue (MR) with the marginal cost (MC) at each level of output.

At output level 1, MR=$50 and MC=$20, so the firm will continue to produce since MR>MC. 
At output level 2, MR=$40 and MC=$28, so the firm will continue to produce since MR>MC. 
At output level 3, MR=$30 and MC=$36, so the firm will continue to produce since MR>MC. 
At output level 4, MR=$20 and MC=$44, so the firm will not produce since MR<MC.

Therefore, the profit-maximizing output level is 3, where the MR and MC are equal ($30). At this level, the total revenue is $90 and the total cost is $44, resulting in a total profit of $46.

The Table Given Below Shows the Total Revenue and Total