Micro Economics, Perfect Competition.
Question: Your t-shirt company operates in a perfectly competitive market. It is currently producing at an output level of 200 units per month. Fixed Costs are $500/month. At the current output level you know that marginal cost is $10 and equals the Average Total Cost. At an output level of 150 you have determined that marginal cost would be $6 and equal to the Average Variable Cost. The market price for t-shirts is $8.
a) if your goal is profit maximization, what should ou do with the production level? Explain.
b) should you shut down? Explain and present the situation graphically.