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From the Following Total Cost and Total Revenue Schedule of a Firm, Find Out the Level of Output, Using Marginal Cost and Marginal Revenue Approach, at Which the Firm Would Be is Equilibrium. Give Reasons for Your Answer. - Economics

From the following total cost and total revenue schedule of a firm, find out the level of output, using marginal cost and marginal revenue approach, at which the firm would be is equilibrium. Give reasons for your answer.

Output
(Units)
Total Revenue
(Rs )
Total Cost
(Rs )
1 10 8
2 18 15
3 24 21
4 28 25
5 30 33
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Solution

Output
(Units)
Total Revenue(Rs) Total Cost(Rs) MR = TRn - TRn-1 MC = TCn - TCn-1
1 10 8 10 8
2 18 15 8 7
3 24 21 6 6
4 28 25 4 4
5 30 33 2 8

The firm would be in equilibrium when following two conditions are satisfied:

1) MR = MC

2) MC is rising or the MC curve cuts the MR curve from below.

Thus, at 4 units of output, the firm is in equilibrium as both the conditions are getting satisfied at this level.

Concept: Basic Concepts of Cost
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