Answers

2016-04-16T23:57:15+05:30
Condition for producer's equilibrium are that Marginal cost(MC) =Marginal Revenue(MR) and that MC curve cuts MR from below. If such a condition is not fulfilled,the optimum point of production hasn't been reached.For eg,if Marginal cost increases while the marginal revenue is stable,this means that with every increase in production,the cost of production is increasing.It means the firm is undertaking higher cost of production which it won't be able to cover by the price it will get after selling the product. So obviously this isn't the equilibrium point. On the other hand, when the marginal cost is less than the marginal revenue,this means that with every increase in production,the cost will fall.A businessman will tend to increase the production till the marginal cost becomes equal to marginal revenue. When marginal cost equals marginal revenue,there is no tendency for the production to either increase or decrease.Hence,it is the equilibrium point.
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