Question

In the TR–TC approach, at which point is the firm’s equilibrium output found?

Options

• Where the vertical distance between TR and TC is the greatest

• Where TR and TC curves are closest to each other

• Where the TR curve is parallel to the X-axis

• Where the TC curve is parallel to the TR curve for all outputs

Answer 1

Where the vertical distance between TR and TC is the greatest

Explanation:

Equilibrium output is where profit (TR − TC) is maximum, i.e., the largest vertical gap between TR and TC.