From the following information about a firm, find the firms equilibrium output in terms of marginal cost and marginal revenue. Give reasons. Also find profit at this output
|Output (units)||Total Revenue (Rs)||Total Cost (Rs)|
(TR − TC)
The producer’s equilibrium refers to the situation in which he maximises his profits. A producer strikes equilibrium when two conditions are satisfied:
i. MR = MC
ii. MC is rising or the MC curve cuts the MR curve from below.
The table indicates that the two conditions of equilibrium are satisfied only when 4 units of output are produced. It is here that (i) MR = MC = Rs 7 and (ii) MC is rising.
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