A firm produces flags in a factory.It sells in two different countries, red flags for the Duchy of Redonia, and green flags in the Republic of Verdeslava. Both flags cost the same to manufacture, and marginal cost is constant. The factory has a limited capacity, and can only make 500 flags per day. It is profitable to run at full capacity, and if capacity were larger, it would be profitable to make even more red and green flags.

Which best describes the profit maximizing rule the factory should follow in deciding how many flags of each color to produce?

A. Produce such that marginal revenue = marginal cost for both countries.

B. Produce only the flags for the country with the largest demand.

C. Produce flags such that the marginal revenue in each country is the same.

D. Produce flags for both countries such that prices in the two countries are equal.