Final answer:
A firm's profit-maximizing output is where market price equals marginal cost. If the market price is above $12, the firm's minimum AVC, it should continue to produce. Below $12, the firm should shut down to minimize losses.
Step-by-step explanation:
When discussing a firm's profit-maximizing level of output, we must consider the relationship between average variable costs (AVC), market price, and marginal cost (MC). The given data indicates that the firm's minimum average variable cost is $12, which we can assume is the AVC curve's lowest point. Average variable costs are calculated by dividing total variable costs by the total output at each output level and are typically U-shaped. When considering profits, if the AVC is lower than the market price, the firm can potentially earn profits, excluding fixed costs.
For a perfectly competitive firm, profit maximization occurs at the output level where the market price is equal to marginal cost, which is represented by the equation P = MR = MC. Since we do not have the exact numbers or a graph (as the reference to Table 8.6 and Figure 8.7 suggests), the conceptual approach is to identify the output level where the firm's marginal cost curve intersects the market price from above. If the price given by the market is above $12, which is the minimum AVC, the firm should continue to produce.
However, if the market price falls below this threshold, the firm would not cover its average variable costs, leading to a situation where the firm should shut down in the short run to minimize losses. Therefore, without specific numbers, the profit-maximizing level of output is where the market price equals or exceeds $12 and corresponds to the point where P = MR = MC on the firm's cost curves.