1. Carmela's Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Carmela's Churros currently is taking in $40,000 in revenues, and has $15,000 in explicit costs and $20,000 in implicit costs.

Given the above information, will marginal revenue increase or decrease in long run? Will marginal cost increase or decrease in long run?

2. For a firm in a perfectly competitive market, when marginal revenue is less than marginal cost, should the firm increase or decrease the level of output? Can the firm raise the marginal revenue?