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प्रश्न
State the conditions of short-run equilibrium of the firm under perfect competition.
दीर्घउत्तर
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उत्तर
The conditions of short-run equilibrium of a firm under perfect competition are:
- Profit Maximization Condition: The firm must produce enough output so that its Short-Run Marginal Cost (SMC) equals Marginal Revenue (MR). Because in perfect competition, price (P) = AR = MR, this condition becomes SMC = P. Also, the SMC curve must cut the MR curve from below in order to maximize profit.
- Sustainability Condition: To be considered sustainable, the firm’s average revenue (AR) must be greater than or equal to its average variable cost (AVC). If AR < AVC, the firm may fail to pay its variable costs and close in the short run.
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