$28×0=$0

$28

$28×1=$28

$28

$28×2=$56

$28

$28×3=$84

$28

$28×4=$112

$28

$28×5=$140

TABLE 8.9

Step 3. Calculate profits as total cost subtracted from total revenue, as Table 8.10 shows.

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8.2 • How Perfectly Competitive Firms Make Output Decisions 203

Quantity Total Revenue Total Cost

Profits (TR−TC)

0

1

2

3

4

5

$0

$28

$56

$84

$112

$140

TABLE 8.10

$20

$40

$45

$55

$72

$0−$20=−$20

$28−$40=−$12

$56−$45=$11

$84−$55=$29

$112−$72=$40

$100

$140−$100=$40

Step 4. To find the profit-maximizing output level, look at the Marginal Cost column (at every output level

produced), as Table 8.11 shows, and determine where it is equal to the market price. The output level where
price equals the marginal cost is the output level that maximizes profits.

Q

P

TFC TVC

TC

AVC

ATC

MC

TR

Profits

0 $28 $20 $0

$20

-

-

-

$0

−$20

1 $28 $20 $20 $40

$20.00 $40.00 $20 $28

−$12

2 $28 $20 $25 $45

$12.50 $22.50 $5

$56

$11
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