A firm is said to be in equilibrium if following two conditions are fulfilled –
(i) Marginal Cost (MC) should be equal to Marginal Revenue, (MR) and
(ii) Beyond the point of equilibrium, MC should tend to rise.
Now let us find MC for the given data
From the above table we can see that MR and MC are both equal when the output is 1 unit and 5 units. However, the firm will be at equilibrium only at the output level of 5 units, because both the conditions of equilibrium are fulfilled at this level of output. At the output level of 1 unit, the MC = MR but after that the MC is falling, so the second condition is not satisfied.
Rate this question :