The table given below shows the total revenue and total cost of a firm at different levels of output. Table 23.2
Consider the perfectly competitive firm described in Table 23.2.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 23.2
 Consider the perfectly competitive firm described in Table 23.2.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 look at the marginal revenue (MR) and marginal cost (MC) of each level of output. 
At an output of 1 unit, MR is $80 and MC is $60, so the firm can increase its profit by producing and selling this unit of output. At an output of 2 units, MR is $70 and MC is $65, so the firm can still increase its profit by producing and selling this unit of output as well. 
At an output of 3 units, MR is $60 and MC is $70, which means that producing and selling this unit of output will decrease the firm's profit. Thus, the profit-maximizing output level is 2 units of output. 
At an output of 2 units, total revenue is $140 ($80 + $60) and total cost is $94 ($50 + $44), so the profit is $46 ($140 - $94). Therefore, the answer is C.

The Table Given Below Shows the Total Revenue and Total