Q.

A firm is in equilibrium when its

A. marginal cost equals the marginal revenue
B. total cost is minimum
C. total revenue is maximum
D. average revenue and marginal revenue are equal
Answer» A. marginal cost equals the marginal revenue
Explanation: A consumer is in a state of equilibrium when he achieves maximum aggregate satisfaction on the expenditure that he makes depending on the set of conditions relating to his tastes and preferences, income, price and supply of the commodity etc. Producers' equilibrium occurs when he maximizes his net profit subject to a given set of economic situations. A firm's equilibrium point is when it has no inclination in changing its production. In short run Marginal revenue = Marginal Cost is the condition of equilibrium.
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