PRODUCER EQUILIBRIUM

1. According to the MR-MC approach, what does a producer's equilibrium refer to?

A) The point at which marginal cost equals marginal revenue

b) The point at which total cost equals total revenue

C) The point at which average cost equals average revenue

D) The point at which fixed cost equals variable cost

2. What is the condition for a producer to continue producing more according to the MR-MC approach?

A) Marginal cost is less than marginal revenue

B) Marginal cost is greater than marginal revenue

C) Total cost is less than total revenue

D) Total cost is greater than total revenue

3. What does it mean when marginal cost is greater than marginal revenue after the equilibrium?

A) Producing more will lead to a decline in profits

B) Producing more will increase profits

C) Producing more will have no effect on profits

D) Producing more will lead to a loss of revenue

4. Why is it important for a firm to compare marginal revenue with marginal cost?

A) To maximize total revenue

B) To minimize total cost

C) To determine the equilibrium level of output

D) To calculate the average revenue

5. What are the two conditions needed for a producer's equilibrium according to the MR-MC approach?

A) Marginal cost equals marginal revenue and total cost equals total revenue

B) Marginal cost is less than marginal revenue and total cost is less than total revenue

C) Marginal cost is greater than marginal revenue and total cost is greater than total revenue

D) Marginal cost is greater than marginal revenue and total cost is less than total revenue

6. Beyond the equilibrium point, if a producer's output level is higher, what happens to profit?

A) Profit increases

B) Profit decreases

C) Profit remains the same

D) Profit becomes negative

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