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Explain the condition of producer's equilibrium with the help of a numerical example. Use Marginal Cost and Marginal Revenue approach. |
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Answer»
Producer's equilibrium refers to a situation, where a producer is producing that level of output, at which its profits are maximum. In other words, it is a situation of profit maximization. Following are the two conditions of producer's equilibrium: (i) MR = MC (ii) MC must be rising at the point of equilibrium or MC curve must cut MR curve from below: These conditions are satisfied when 4 units of output are produced in the given schedule. |
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