Explanation:

In perfect competition, a firm maximizes profit where Marginal Revenue (MR) equals Marginal Cost (MC). Since this is perfect competition, price is constant and equal to MR.

From the table:

• Price = Total Revenue / Quantity = $210/21 = $10 per unit

Calculating Marginal Revenue and Marginal Cost:

1. From 21 to 22 units:

   • MR = ΔTR/ΔQ = ($220 - $210)/(22-21) = $10
   • MC = ΔTC/ΔQ = ($145 - $138)/(22-21) = $7
   • Profit increases by $3 ($10 - $7)

2. From 22 to 23 units:

   • MR = ($230 - $220)/(23-22) = $10
   • MC = ($154 - $145)/(23-22) = $9
   • Profit increases by $1 ($10 - $9)

3. From 23 to 24 units:

   • MR = ($240 - $230)/(24-23) = $10
   • MC = ($165 - $154)/(24-23) = $11
   • Profit decreases by $1 ($10 - $11)

Calculating Total Profit at each output level:

• At 21 units: Profit = $210 - $138 = $72
• At 22 units: Profit = $220 - $145 = $75
• At 23 units: Profit = $230 - $154 = $76
• At 24 units: Profit = $240 - $165 = $75

The maximum profit is $76 at 23 units. The firm should produce 23 units because:

• At 23 units, MR ($10) > MC ($9), so producing more would increase profit
• At 24 units, MR ($10) < MC ($11), so producing the 24th unit would reduce profit

Therefore, the profit-maximizing output is 23 units.