​Consider a Firm Operating in a Perfectly Competitive Market

Multiple Choice

​Consider a firm operating in a perfectly competitive market. At its current output of 200 units, marginal revenue is $25. At this output, average total cost is decreasing and equals $22. Given this information, what should the firm do?

A) ​Continue to produce 200 units, because this maximizes profits.
B) ​Increase output beyond 200 units, since a higher output will yield the profit maximizing output level.
C) ​Decrease output below 200 units, since a lower output will result in the profit maximizing output level.
D) ​More information is needed to determine the firm's next step.