Will a profit-maximizing firm in a competitive market ever produce a positive level of output in the range where the marginal cost is falling? Give an explanation.

3

(a)

The following table shows the total revenue and total cost schedules of a competitive firm. Calculate the profit at each output level. Determine also the market price of the goods.

Quantity sold (Units)	0	1	2	3	4	5	6	7
TR (in Rs)	0	5	10	15	20	25	30	35
TC (in Rs)	5	7	10	12	15	23	33	40
Profit (Rs)	-	-	-	-	-	-	-	-

3

(a)

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)