This graph depicts the cost structure for a firm in a competitive market. Which of the following statements best reflects the situation faced by the firm when price increases from P2 to P4?
a) the firm will earn profit equal to (P4 – P2) Q2
b)marginal revenue is higher than marginal cost at the previous level of output, so it increases production
c) marginal revenue is lower than marginal cost at the previous level of output, so it decreases production
d) average total cost is higher than at the previous level of output so it decreases production