If a price taker produces an output level where price is less than marginal cost,then the firm should

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If the price taker produces an output level where price is less than marginal cost, then the firm is experiencing a loss. The best option for the firm in this situation is to decrease output to earn a higher profit or a smaller loss. This is because producing at a level where price is less than marginal cost means that the firm is spending more to produce the product than it is receiving from selling it. Therefore, reducing output will reduce the cost of production and increase the profit margin or decrease the loss. Neither raising the price nor paying less to fixed factors of production are feasible options as the firm is a price taker and has no control over the market price or the prices of fixed inputs. Increasing output will further increase the loss as the cost of production will go up. Hence, the best choice is (C) decrease output to earn a higher profit or a smaller loss.

If a Price Taker Produces an Output Level Where Price