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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 in equilibrium. Give reasons for your answer.Output (units)Total Revenue (In Rs.)Total cost (In Rs.)110821815324214282553033 |
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Answer» 'The equilibrium level of output wiil be 4 units. This is because at this point the two conditions of equilibrium (using MR-MC approach are met . This can be seen as follows : we are giver-r the Tctal Revenue (TR) and Total Cost. From here, we can find Marginal Revenue (MR) and Marginal Cost (MC), as given in the foilowing schedule :
Here, as we can see, the conditions of equilibrium through MR-MC approach are being met at unit 4' That is, First Condition: MR=MC=4 Second condition: MC is rising from this point and meets MR from below. Thus, equilibrium output is 4 units
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