FIGURE 2 PROFIT MAXIMIZATION IN THE SHORT RUN IN PERFECTLY COMPETITIVE MARKETS
If the firm produces 85 standardized windsurfing sails, the marginal cost to produce the last sail exceeds the revenue from its sale, thus reducing the firm’s profits. For the 84th unit produced, marginal cost and price are both equal to $200; therefore, the firm earns a normal return from producing this unit. Producing only 83 units means relinquishing the normal return that could have been earned from the 84th sail. Hence, the firm maximizes profits at an output of 84 (point e), where MC = MR = P = $200.