It's okay to laugh when you're attempting a posture that's difficult for you.

IMO, it's BETTER to laugh. And in my limited experience, the poses that bring out the most laughter are ... you guessed it ... arm balances and inversions.

I'm really competitive too in most situations, but it doesn't affect my yoga classes much at all. Maybe it's because the teacher usually warms us up with some kriyas. So by the time we attempt muscularly challenging standing poses, arm balances or inversions, we're already pretty deep, and we've already challenged ourselves physically with eyes closed.