1.) In the short run, Cat World Treats is selling cat treats in a purely competitive market.Its output is 800 treats, which it sells for $10 a treat. At the 800-treat level of output, the marginal cost is $10, the average total cost is $9.00, and the average variable cost is $8.00.

a.) Is the firm producing at its optimal level of output? Why or Why not? Explain

b.) Should Cat World Treats continue to produce in the short run or should they shut down? How do you know? Explain and be sure to include a graph in your answer.