Question

Explain the conditions of equilibrium of a firm based on marginal cost and marginal revenue.

Answer 1

Heya...

Condition of Equilibrium in MR and MC approach..

1st condition..

# MR= MC...

Means if MR>MC then producer can earn more profit by increase in output...

If MR< MC then by cutting in production producer can earn more profit..

So MR = MC is best situation ....

2nd condition...

# MC must be rising ...

Because MC rising means the second stage of production means diminishing return to factor at this it earn maximum profit...

Hope it helps u..