Afirm sells a product in a purely competitive market. the marginal cost of the product at the current output level of 800 units is $3.50. the minimum possible average variable cost is $3. the market price of the product is $4. to maximize profits, the firm should a. continue producing 800 units. b. decrease production to less than 800 units. c. increase production to more than 800 units. d. shut down.

The correct answer is option

Explanation:

A firm operating in a perfectly competitive market is producing 800 units. The marginal cost is $3.50. The minimum average variable cost is $3. The market price is $4.  

The firm will be able to maximize its profit at the point where the price of the product is equal to marginal cost and is able to cover the average variable cost of the product.  

This firm should thus increase its production to more than 800 units till the marginal cost is equal to the price which is $4.  

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