A perfectly competitive firm produces at an output at which

A perfectly competitive firm produces at an output at which marginal revenue is less than marginal cost. To maximize profit, the firm should: produce more. maintain its level of output O produce less. If the price of output decreases, the firm\'s optimal level of output will Click to select)

Solution

At current level of production, marginal revenue is less than the marginal cost.

When MR is less than MC, firm is experiencing economic loss.

In such scenario, it is prudent for firm to reduce production so as to maximize profit or minimize loss.

Thus,

A perfectly competitive firm produces at an output at which marginal revenue is less than the marginal cost. To maximize profit, the firm should produce less.

Hence, the correct answer is the option (3).

If the price of output decreases, the firm\'s optimal level of output will decrease.