Correct Answer: Option C

Explanation

In perfect competition, a firm's marginal cost (MC) represents the additional cost incurred by producing one more unit output, while marginal revenue (MR) represents the additional revenue generated from selling one more unit of output. To maximize profit, a firm in a perfectly competitive market will produce at the quantity where marginal cost equals marginal revenue.
When MC is less than MR (MC < MR), producing an additional unit of output will generate more revenue than the cost incurred, indicating that increasing production is profitable. Conversely, when MC is greater than MR (MC > MR), producing an additional unit of output would result in higher costs than the revenue generated, leading to a decrease in profit. The profit is maximized at the quantity where MC is equal to MR.

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