Use the table to answer the question.
# of Workers Output Fixed Cost ($) Variable Cost ($) Total Revenue ($)
0 0 100 - -
10 300 100 90 150
20 800 100 295 400
30 1,200 100 490 600
40 1,500 100 670 750
At what output level should a perfectly competitive firm choose to produce at?
A perfectly competitive firm would choose to produce at the output level where marginal revenue equals marginal cost. Looking at the table, we can see that the marginal cost is equal to the change in Variable Cost as output increases.
For each additional worker, the variable cost increases by:
10 workers: 90
20 workers: 295-90 = 205
30 workers: 490-295 = 195
40 workers: 670-490 = 180
This means that the marginal cost decreases as output increases, so the firm should produce at the highest level of output in the table - 40 workers.