Question

A firm is said to be in producer’s equilibrium under the MR–MC approach when ______.

Options

• MR > MC at the chosen output

• MR < MC at the chosen output

• MR = MC, and MC cuts MR from below

• Total cost is equal to total fixed cost

Answer 1

A firm is said to be in producer’s equilibrium under the MR–MC approach when MR = MC, and MC cuts MR from below.

Explanation:

Both the equality of MR and MC and the condition that MC cuts MR from below are required to ensure maximum profit.