Question

Refer to the diagram given below and choose the correct statement.

पर्याय

• E₁ is the equilibrium point as MR = MC.

• E₁ and E₂ are equilibrium points as MR = MС.

• E₂ is the equilibrium point because MC > MR beyond this point.

• E₂ is the equilibrium point because MC < MR beyond this point.

Answer 1

E₂ is the equilibrium point because MC > MR beyond this point.

Explanation:

In the given diagram, equilibrium is determined by the Marginal Cost (MC) = Marginal Revenue (MR) condition. However, for a stable equilibrium, the MC curve must be rising after the point of intersection (i.e., MC > MR beyond the point).

At E₁, MC = MR, but MC is still decreasing, making it an unstable equilibrium.

At E2, MC = MR, and MC is increasing beyond this point (MC > MR), ensuring a stable equilibrium.

Thus, E₂ is the correct equilibrium point.