Answer
less
Work Step by Step
If price is less than marginal cost, a firm should then produce less.
Profit-maximizing rule: produce where marginal cost (MC) = marginal revenue (MR).
In perfect competition, MR = market price = \$5.
Here, MC = $7 > MR = $5, so producing more would increase costs more than revenue, reducing profit.
The farmer should reduce output until MC falls to $5.
