Question

Distinguish between firm and industry equilibrium.

Answer 1

Basis	Firm Equilibrium	Industry Equilibrium
Definition	The condition where a single firm maximizes its profit by producing at a level where MR = MC and MC cuts MR from below.	The condition where the total demand for a product equals the total supply from all firms, resulting in stable prices and output.
Scope	Applies to an individual firm.	Applies to the entire industry, comprising multiple firms.
Output level	Determined by the profit-maximizing behavior of a single firm.	Determined by the aggregate output of all firms in the industry.
Price determination	Firm is a price taker in perfect competition.	Industry sets the market price based on the interaction of overall demand and supply.
Equilibrium condition	MR = MC, and MC must cut MR from below.	Industry equilibrium occurs where Market Demand = Market Supply.