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QUESTION
Shazam, a maker of magic wands, is selling in a purely competitive market. Its output is 500 wands, which sell for $10 each.
Shazam, a maker of magic wands, is selling in a purely competitive market. Its output is 500 wands, which sell for $10 each. At this level of output, the marginal cost is $10 and the average variable cost is $12. Should the firm increase output, decrease output, or not produce? Why?
