The sufficient condition for a firm to be in equilibrium is that the

The sufficient condition for a firm to be in equilibrium is that the
A. marginal revenue curve is above the average revenue curve
B. marginal cost curve cuts the marginal revenue curve from below
C. firm must show that it is profitable
D. marginal cost must be equal to average revenue
Correct Option: Answer is B
The correct answer is B. The sufficient condition for a firm to be in equilibrium is that the marginal cost curve cuts the marginal revenue curve from below.
In perfect competition, a firm maximizes its profit by producing at a quantity where marginal cost (MC) equals marginal revenue (MR). When MC is less than MR, increasing production would result in higher revenue than the additional cost, so the firm should produce more. When MC is greater than MR, the additional cost of producing an extra unit would exceed the additional revenue, so the firm should produce less.
Therefore, for a firm to be in equilibrium, the MC curve must intersect the MR curve from below.

0 0 votes
Article Rating
Subscribe
Notify of
guest

0 Comments
Inline Feedbacks
View all comments
0
Would love your thoughts, please comment.x
()
x
Scroll to Top