question_answer

Given below is the cost schedule of a product produced by a firm. The market price per unit of the product at all levels of output is Rs 12. Using marginal cost and marginal revenue approach, find out the level of equilibrium output. Give reasons for your answer:
Output (Units)	1	2	3	4	5	6
Average (Cost) (Rs)	12	11	10	10	10.4	11

Answer:

Output	AR (Rs.)	TC (Rs.)
1	20	22
2	20	42
3	20	60
4	20	76
5	20	96
6	20	120
MR	MC
20	22
20	20
20	22
20	26
20	20	Equilibrium
20	36
At \[{{5}^{th}}\] unit of output, the producer will be in equilibrium because at this unit, MR is equal to MC and MC curve cuts MR from below.