he town of "Micro-Fullerton" has a populace that loves tacos. There are taco stands on every street corner in town. All the tacos sold are the same in quality, size and taste. As a result, the market for tacos is perfectly competitive and sell for $3 each. One day, you walk by and hear two taco stand owners talk. You hear this exchange.

Makenna: "I cannot not make enough money selling tacos. In fact, I am losing money! I am not even going to open for business today."

Nabeeha: "My friend, there is no reason to be upset. You will be better off still working even though you are making a loss."

• • • If both Makenna and Nabeeha are right, explain why it makes sense for Makenna to remain open despite operating at a loss. Talk in terms of Price relative to ATC, AVC. (10 points)
    • Draw a graph showing a possible MC, ATC, AVC and AR curves. Make sure it is clearly labeled and legible. Hand drawn is fine. (10 points)