Question

In terms of total revenue and total cost, the producer is in equilibrium at the output level where ______.

Options

• TR and TC are equal for the first time

• TR is always below TC

• The vertical distance between TR and TC is the greatest

• TR and TC do not intersect at all

Answer 1

In terms of total revenue and total cost, the producer is in equilibrium at the output level where the vertical distance between TR and TC is the greatest.

Explanation:

Under the TR–TC approach, equilibrium output is where the vertical gap between the TR and TC curves is maximum, because this gap represents maximum profit.