A local company has asked you for advice to improve its financial performance. You ask them a series of questions to determine the market structure of the industry and find that the firm sells a standard product that is indistinguishable from its competitors, there are many firms operating in the market, and the barriers to entry and exit are very low.
The firm produces 10 units of output currently.
The firm faces diminishing returns at this level of output. The marginal cost of the 10th unit of output is $60 , the ATC is $50, the AVC is $42, and the firm sells the product for $45, which is also the breakeven price.