A perfectly competitive firm's output is currently such that its marginal revenue is $5 and marginal cost is $4. Assuming profit maximization, the firm should

A. cut price and increase output.

B. raise price and decrease output.

C. leave price unchanged and increase output.

D. leave price unchanged and decrease output.

C) leave price unchanged and increase output.

Explanation:

A perfectly competitive firm will maximize its profits when marginal revenue equals marginal cost.

In this case the marginal revenue ($5) is higher than the marginal cost ($4), therefore the company should increase its output until the marginal cost increases to $5.