The Market Price for a Perfectly Competitive Product Is $10

Multiple Choice

The market price for a perfectly competitive product is $10. If, at its current level of production, marginal cost is equal to $10.50, the firm should:

A) increase production until marginal cost declines to $10.
B) go out of business, as it is impossible to earn a profit when marginal cost exceeds price.
C) cut back on production until marginal cost declines to $10.
D) increase production until average total cost declines to $10.