Answer to Question #18770 in Microeconomics for shpetime

Question

Good grapes is selling grapes in a purely competitive market. Its output is 5000 pounds, which it sells for $5 a pound. At the 5000-pound level of output, the average variable cost is $4.00, the marginal cost is $4.25, and the average total cost is $ 4.50 a pound. Should the firm increase output, decrease output, or not produce? Why? How should the firm determine the optimal level output.