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?  Explain why?

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Equilibrium Price and Quantity

Equilibrium refers to a state of balance that comes about because there is equality in all forces.