Background of supply and market structure Table 1. Cost and Revenue of Good X. Quantity Price = Marginal Revenue ($) Average Cost ($) 0 Not Available Not Available 1 8 9 2 8 5 3 8 3.67 4 8 3.25 5 8 3.8 6 8 4.5 7 8 5.29 Fixed cost is $5. a. Referring Table 1, calculate total cost and marginal cost for each quantity level. b. Based on your answers in part (a), explain why the firm operates under a competitive industry. How many good X should the firm produce at the optimal output level? Does firm earn profits at the optimal output level?