Explain the conditions of producer's equilibrium
Explain the conditions of producer's equilibrium
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The two conditions of producers equilibrium are:
(i) MC= MR
(ii) MC becomes greater than MR if more is produced after the point of equilibrium.
Explanation:
(i) If MC is less than MR, it is profitable to produce more units till MC becomes equal to MR.
(ii) When MC becomes greater than MR after the MR = MC condition, production of each new unit is sold at a loss, which leads to decline in profits.
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