Chapter-Theory of Production, Cost and Revenue Micro Economics class 11 in english Medium CBSE Notes

Producers Equilibrium :

Producer's equilibrium refers to that level of output at which producer attains maximum profit.

Profit = TR - TC

The point where TR - TC is maximum is the equilibrium level of output for producers.

Approaches to producer equilibrium

(a) TC - TR approach

(b) MC - MR approach (Marginal Cost inclusive of normal profit).

(a) TC - TR approach - Conditions for producers equilibrium:

= TR - TC should be maximum.

= Profit falls if more unit of output is produced

(b) MC - MR approach - Conditions for producers equilibrium:-

= MR = MC

= MC cuts MR from below to become greater than MR after MR = MC level of output.

The point where both the conditions are satisfied is the equilibrium point.

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