Question 50
HardOriginal questionA firm sells at a market price of ₹20 a unit. Its total cost schedule is:
| Output | 0 | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|---|
| Total cost (₹) | 20 | 35 | 45 | 57 | 77 | 103 | 135 |
The 4th unit adds the same to revenue as to cost. Why is 4 units still the equilibrium rather than 3?
Show the answer and explanation
CorrectNot quiteAnswer C
Correct answer: C
Explanation
Profit at 3 units = 60 − 57 = ₹3; at 4 units = 80 − 77 = ₹3: the 4th unit adds 20 − 20 = 0.
By convention the equilibrium is placed where MC = MR, here the 4th unit; profit is the same.
- Concept
- A unit with MR = MC
- Typical timeTypical
- 100 s
- Your timeYours
- —
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