$480

$4

$4

$4

$4

$4

$4

$4

$4

$4

$4

$4

$4

$4

-$62

-$50

-$30

-$6

$22

$50

$75

$90

$90

$64

$0

-$110

-$235

TABLE 8.3 Marginal Revenues and Marginal Costs at the Raspberry Farm

In this example, the marginal revenue and marginal cost curves cross at a price of $4 and a quantity of 80

produced. If the farmer started out producing at a level of 60, and then experimented with increasing

production to 70, marginal revenues from the increase in production would exceed marginal costs—and so

profits would rise. The farmer has an incentive to keep producing. At a level of output of 80, marginal cost and
194 8 • Perfect Competition

marginal revenue are equal so profit doesn’t change. If the farmer then experimented further with increasing

production from 80 to 90, he would find that marginal costs from the increase in production are greater than

marginal revenues, and so profits would decline.
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