A Firm Sells a Product in a Purely Competitive Market

Multiple Choice

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $4 and the market price is $4.5. What should the firm do?

A) shut down if the minimum possible average variable cost is below $4.5
B) decrease output if the minimum possible average variable cost is below $4.5
C) increase output if the minimum possible average variable cost is below $4.50
D) increase output if the minimum possible average variable cost is above $4.5