Question

Assertion (A): The state of producer’s equilibrium reflects maximum profit.

Reason (R): MC = MR and marginal cost curve cuts the marginal revenue curve from below.

Options

• Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is true, but Reason (R) is false.

• Assertion (A) is false, but Reason (R) is true.

Answer 1

Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Explanation:

A producer is in equilibrium at the output level that maximises profit. The conditions MC = MR and that the MC curve cuts the MR curve from below establish profit-maximising equilibrium, so the Reason correctly explains the Assertion.