How should the firm determine the optimal level of output

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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 of output?

If Good Grapes were to become a monopoly, how would the monopoly compare to perfect competition in terms of price, output and efficiency?

Reference no: EM13183379

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