What conditions must hold if a profit-maximizing firm produces positive output in a competitive market?

6

(a)

Explain the producer's equilibrium with MR/MC approach (when Price remains constant with the rise in output).

6

(a)

Explain the conditions of a producer's equilibrium in terms of marginal cost and marginal revenue. Use diagram

6

(a)

Why is the equality between marginal cost and marginal revenue necessary for a firm to be in equilibrium? Is it sufficient to ensure equilibrium? Explain.

6

(a)

Elaborate the implication of the conditions of equilibrium of a firm

6

(a)

Can there be a positive level of output that a profit-maximizing firm produces in a competitive market at which market price is not equal to marginal cost? Give an explanation.

6

(a)

Explain why will a producer not be in equilibrium if the conditions of equilibrium are not met.

6

(a)

The following table shows the total cost schedule of a competitive firm. It is given that the price of the goods is Rs10. Calculate the profit at each output level. Find the profit maximising level of output.

Output Sold	0	1	2	3	4	5	6	7	8	9	10
TC (in Rs)	5	15	22	27	31	38	48	63	81	101	123

6

(a)

On the basis of the information given below, determine the level of output at which the producer will be in equilibrium. Use the marginal cost-marginal revenue approach. Give reasons for your answer.

Output (units)	1	2	3	4	5	6	7
Average Revenue(Rs)	7	7	7	7	7	7	7
Total Cost (Rs)	7	15	22	28	33	40	48

6

(a)

A table showing TC and TR of a firm is given. Calculate MCand MR and find out the equilibrium level of output.

Output	1	2	3	4	5	6	7	8	9	10
TC	45	80	95	105	135	175	225	285	360	440
TR	40	80	120	160	200	240	280	320	360	400

6

(a)