Question

Which pair of conditions must be satisfied for producer’s equilibrium under the MR–MC approach?

Options

• MR > MC and MC is falling

• MR = MC and MC is rising

• MR < MC and MC is constant

• MR = MC and MC is falling

Answer 1

MR = MC and MC is rising

Explanation:

Producer’s equilibrium occurs where marginal revenue equals marginal cost and, at that point, marginal cost is rising and cuts the MR curve from below.