Question on the effect of product falls to the firms output

From the data in the given table, illustrates what happens to the firm’s output choice and profit if the price of the product falls from $40 to $35.

The table below illustrates the firm’s revenue and cost information while the price falls to $35.

715_tbl 0.png

At price of $40, the firm must produce eight units of output to maximize profit since this is the point closest to where price equals marginal cost without having marginal cost exceed price.  At price of $35, the firm have to produce seven units to maximize profit.  While price falls from $40 to $35, profit drop from $60 to $23.



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