Producer’s equilibrium refers to the situation where a producer maximizes his profits or minimizes his losses. At this point, the producer is producing a certain amount of output by using the least cost combination of factors. This optimum combination is either where:
- The output derived from a given level of inputs is maximum, or
- The cost of producing a given output is minimum.
In other words, the producer’s equilibrium is the level of production at which profit is maximized the difference between total revenue and total cost is the greatest.
