Why is the equality between marginal cost and marginal revenue necessary for a firm to be in equilibrium ? Is it sufficient to ensure equilibrium ? Explain.

Why is the equality between marginal cost and marginal revenue necessa

1.	Why is the equality between marginal cost and marginal revenue necessary for a firm to be in equilibrium ? Is it sufficient to ensure equilibrium ? Explain.
Answer» Solution :The producer's equilibrium conditions are `(i) MC=MR and (II) MC gt MR` after equilibrium. SUPPOSE `MC gt MR:` in this situation it will be profitable for the firm to produce more or less depending upon relative CHANGE in MC and MR till MC=MR. Suppose `MC lt MR:` it will be profitable for the producer to producer more till MC=MR. MC =MR is not a sufficient CONDITION to ensure equilibrium. GIVEN MC=MR suppose the behaviour of MC and MR is such that if one more unit is produced, MC becomes less than MR. Then in this case it will be profitable for the firm to producemore . therefore INTHIS case though MC=MR , the producer is notin equilibrium However, if after MC=MR output. ,MC becomes greater than MR It will be most advantageous for thefirm to produce only upto MC=MR.