This a MCQ (Multiple Choice Question) based practice test of Chapter 4- Theory of Firm Under Perfect Competition of Economics of Class XII (12) for the quick revision/preparation of School Board examinationsQ Condition for producer equilibrium is:a)TC=TSCb)MC=MRc)TR=TVCd)None of aboveCorrect answer is 'B'. Can you explain this answer?

Question

Answer

Condition for Producer Equilibrium

The producer equilibrium is a situation where a firm is maximizing its profits by producing a level of output where marginal cost (MC) is equal to marginal revenue (MR). In other words, the producer equilibrium is reached when a firm is producing at the point where it is making the highest possible economic profit.

The condition for producer equilibrium is as follows:

MC = MR

Explanation

Marginal cost (MC) is the additional cost of producing one more unit of output. Marginal revenue (MR) is the additional revenue earned by selling one more unit of output. In perfect competition, a firm is a price taker, meaning it cannot influence the market price of the product it sells. Therefore, the price of the product remains constant for the firm.

In perfect competition, the firm's marginal revenue (MR) is equal to the price of the product. Therefore, the condition for producer equilibrium can be rephrased as:

MC = P

where P is the price of the product.

If a firm produces at a level where MC is less than MR, it means that the firm can increase its profits by producing more units of output. Similarly, if a firm produces at a level where MC is greater than MR, it means that the firm can increase its profits by producing fewer units of output. So, the producer equilibrium is reached only when MC is equal to MR, where the firm is producing the level of output that maximizes its profits.

Conclusion

The condition for producer equilibrium is MC = MR, where a firm is producing the level of output that maximizes its profits. In perfect competition, where a firm is a price taker, the condition can be rephrased as MC = P.

Answer

Yes correct option is B

Answer

Well we know that as long as MC is less than MR it

is profitable for the producer

Answer

Because both r U shape

Answer

Producer's Equilibrium: Equilibrium refers to a state of rest when no change is required. A firm (producer) is said to be in equilibrium when it has no inclination to expand or to contract its output. This state either reflects maximum profits or minimum losses. Producer’s equilibrium is often explained in terms of marginal revenue (MR) and marginal cost (MC) of production. Profit is maximized (or a producer strikes his equilibrium) when two conditions are satisfied – (i) MR = MC, and (ii) MC is rising (or MC is greater than MR beyond the point of equilibrium output)

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