Why isequalitybetweenMC and MRnecessary for a firmto be in equilibrium ? Is it sufficient to ensureequilibrium ? Explain.

Why isequalitybetweenMC and MRnecessary for a firmto be in equilibrium

1.	Why isequalitybetweenMC and MRnecessary for a firmto be in equilibrium ? Is it sufficient to ensureequilibrium ? Explain.
Answer» Solution :Theproducer's equilibrium conditions are : (i) MC =MR and (II)`MC gt MR`afterequilibrium. Suppose `MC gt MR`. In thissituations it willbe profitable for thefirmto produce moreor less dependinguponrelativechanges in MC and MRtill MC=MR. Suppose `MC gt MR` . It will beprofitablefor theproducer toproduce more tillMC=MR. MC=MR is not asufficient condition to ensure equilibrium .Given MC=MR supposethe behaviour of MC and MR is such thatif onemoreunit isproduced . MCbecomes lessthan MR . Thenin thiscase it will be profitablefor the firm to produce more .Therefore in thiscase THOUGH MC=MR theproducer is not inequilibrium. However if after MC=MR output MC becomes greater than MRit willbe mostadvantageous for THEFIRM to produce only upto MC=MR.