In the graph, MC equals MR at A and at B. At which point is the firm in equilibrium? A U-shaped MC curve, lowest at ₹12 at 3 units, and a horizontal MR = P line at ₹20. MC equals MR at A (1 unit), where MC is falling, and at B (5 units), where MC is rising.

In the graph, MC equals MR at A and at B.

Question 35

MediumOriginal question

In the graph, MC equals MR at A and at B. At which point is the firm in equilibrium?

A U-shaped MC curve, lowest at ₹12 at 3 units, and a horizontal MR = P line at ₹20. MC equals MR at A (1 unit), where MC is falling, and at B (5 units), where MC is rising.

At A (1 unit), where MC is fallingCorrect answerYour answerAt both A and BCorrect answerYour answerAt 3 units, where MC is lowestCorrect answerYour answerAt B (5 units), where MC is risingCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer D

Correct answer: D

After A, MC drops below MR, so producing more adds to profit: A is a point of least profit, not most.
At B, MC = MR and MC is rising: beyond B each unit costs more than it brings in. Equilibrium is at 5 units.

Concept: Choosing between two MC = MR points
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsProducer's equilibrium: MC = MR

Practise this chapter →

Ten questions from Revenue & Producer's Equilibrium, at your own pace.

Practise this chapter →

Ten questions from Revenue & Producer's Equilibrium, at your own pace.

In the graph, MC equals MR at A and at B.

Question 35

Explanation