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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» <html><body><p><br/></p>Solution :The producer's equilibrium conditions are `(i) MC=MR and (II) MC gt MR` after equilibrium. <br/><a href="https://interviewquestions.tuteehub.com/tag/suppose-656311" style="font-weight:bold;" target="_blank" title="Click to know more about SUPPOSE">SUPPOSE</a> `MC gt MR:` in this situation it will be profitable for the firm to produce more or less depending upon relative <a href="https://interviewquestions.tuteehub.com/tag/change-913808" style="font-weight:bold;" target="_blank" title="Click to know more about CHANGE">CHANGE</a> in MC and MR till MC=MR. <br/> Suppose `MC lt MR:` it will be profitable for the producer to producer more till MC=MR. <br/> MC =MR is not a sufficient <a href="https://interviewquestions.tuteehub.com/tag/condition-409743" style="font-weight:bold;" target="_blank" title="Click to know more about CONDITION">CONDITION</a> to ensure equilibrium. <a href="https://interviewquestions.tuteehub.com/tag/given-473447" style="font-weight:bold;" target="_blank" title="Click to know more about GIVEN">GIVEN</a> MC=MR suppose the behaviour of MC and MR is such that if one more unit is produced, MC becomes less than MR. <br/> Then in this case it will be profitable for the firm to producemore . therefore <a href="https://interviewquestions.tuteehub.com/tag/inthis-2746203" style="font-weight:bold;" target="_blank" title="Click to know more about INTHIS">INTHIS</a> 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.</body></html>


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