Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price exceeds this firmʹs marginal and average variable costs. To maximize profits, Cathy's should

A) make no adjustments as they are already maximizing their profits.
B) increase their output.
C) decrease their output.
D) stop producing since it is earning a loss.

Perfectly Competitive Market

A theoretical market structure where many buyers and sellers trade homogeneous products, and no single participant can influence the price.

Marginal Costs

The price increase resulting from the creation of an additional product or service unit.

Average Variable Costs

The total variable costs divided by the quantity of output produced, representing the variable cost per unit of output.