Detail

We know that perfectly competitive firms produce where MC = P if possible. If this can't be exactly achieved, come as close as possible as long as MC < P.

Since we know that P = $32 we have to find where MC = $32 or where it's just below. The table doesn't give MC but it does give total cost for each unit produced. We know that marginal cost is just the change in cost due to an increase in output of one unit. To be very careful we could just go ahead and compute the MC for each unit and add it as a column to the table. As we can see once we do this, the firm will maximize profits by producing 5 units since the MC of the 5^th unit is just below the price but the MC of the 6^th unit is higher than the price.

GROSS GENERALIZATIONS
Output	Total Cost	Marginal Cost
0	25.00	-
1	35.00	10
2	50.00	15
3	70.00	20
4	95.00	25
5	125.00	30
6	160.00	35
7	200.00	40

20. Gross Generalizations is a profit maximizing perfectly competitive firm whose output and cost data are given in the table above. If the market price of generalizations is $32, how many will Gross produce?

3 generalizations. The MC of the 3^rd unit is only 20 so the firm will produce it for certain, but it would also produce the 4^th unit whose MC is only 25, still below the price of $32
4 generalizations. The MC of the 4^th unit is only 25 so the firm will produce it for certain, but it would also produce the 5^th unit whose MC is 30, still below the price of $32.
5 generalizations.
6 generalizations. The MC of the 6^th unit is 35 which is $3 greater than the price of $32. If the firm produced this unit and sold it profits would be reduced by $3.
7 generalizations. The MC of the 7^th unit is 40 which is $8 greater than the price of $32. If the firm produced this unit and sold it profits would be reduced by $8. But to produce the 7^th unit the firm would also have to produce the 6^th so it would make itself a total of $11 worse off by producing the 7^th unit.