In a perfectly competitive market, how does a firm determine its optimal output level for profit maximization?

In a perfectly competitive market, a firm determines its optimal output level for profit maximization by comparing its marginal cost (MC) to the market price. The firm will keep increasing its production as long as the price it receives for each additional unit is greater than the cost to produce that unit. This is because producing more when MC is less than the price adds to the firm's profit. For example, if a firm can sell each additional widget for $10, but it costs $6 to make one more widget, it should keep producing until the cost of making one more widget equals $10. Once the MC rises to meet the price, the firm has found its optimal output level, maximizing its profit.