Give the meaning of producer's equilibrium. A producer produces that q

1.	Give the meaning of producer's equilibrium. A producer produces that quantity of his product at which marginal cost and marginal revenue are equal. Is he earning maximum profit? Give reasons for your answer.
Answer» Producers Equilibrium-A producer (firm) is said to be in equilibrium when the firm is producing that quantity of output which gives the firm maximum profit. For a firm to be in equilibrium two conditions must be fulfiIled. First and the necessary condition is that firm's marginal cost equals marginal revenue. Second, along with the first condition is that MC must be greater than MR beyond the level of output at which MC = MR. Therefore, fulfillment of the first condition alone does not ensure maximum profits. It is possible that MC = MR condition may be fulfilled at more than one output level but only that output level beyond which MC > MR is the maximum profits output level.

Give the meaning of producer's equilibrium. A producer produces that quantity of his product at which marginal cost and marginal revenue are equal. Is he earning maximum profit? Give reasons for your answer.

Answer»

Producers Equilibrium-A producer (firm) is said to be in equilibrium when the firm is producing that quantity of output which gives the firm maximum profit.

For a firm to be in equilibrium two conditions must be fulfiIled. First and the necessary condition is that firm's marginal cost equals marginal revenue. Second, along with the first condition is that MC must be greater than MR beyond the level of output at which MC = MR. Therefore, fulfillment of the first condition alone does not ensure maximum profits. It is possible that MC = MR condition may be fulfilled at more than one output level but only that output level beyond which MC > MR is the maximum profits output level.

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