A potato farmer is operating in a perfectly competitive market. The current market rate for eachkilogram of potato at$40. He currently produces 1000 kilogramsof potatoes and sells the entire produce within a day. The cost of producing an additional kilogram would be $30, and this cost will increase as he produces more and more potatoes (because he will have to start planting on less fertile land, which is more costly). Which of the following actions should he take?

1. He should hoard his potatoes to reduce the supply inthe market.
2. He should reduce the amount of potatoes he produces to reduce costs.
3. He should increase the amount of potatoes he produces despite increasing costs.
4. He should charge$30 per kilo.