Page 1 :
PRODUCER'S, EQUILIBRIUM, , Producer's Equilibrium : A, producer or firm is said to be in, equilibrium when it produces that, level of output which gives him, maximum profit and he has no, incentive to change its existing, level of output., , Profit : Profit refers to the excess, of revenue over expenditure., Revenue means the amount, received from the sale of goods, and the expenditure means the, expenses incurred on production, of such goods.

Page 2 :
Methods for determination of, Producer's equilibrium :, , 1. TR and TC approach, 2. MR and MC approach., , Marginal Revenue — Marginal, Cost Approach (MR-MC, , Approach)

Page 3 :
Condition of Equilibrium :, , 1. MC =MR: MRis the addition to TR, when an additional unit is sold and, MC is the addition to TC when an, additional unit is produced. Every, firm wants to maximize its profits., For this, a firm compares its MR, and MC. Profits will increase as, long as MR is more than MC and, profits will fall when MR is less, than MC. So, equilibrium is not, achieved when MC < MRas itis, possible to increase the profits by, producing more output. Producer, will also not be in equilibrium when, MC < MR because here benefits are, less than its cost. It means that the, firm will be in equilibrium only, when MC = MR.

Page 4 :
2. MC is greater than MR after MC =, MR level of output : MC = MRisa, necessary condition for equilibrium, but it is not the sufficient condition, to achieve equilibrium. Because, MC = MR may occur at two levels, of output. And of these, there is, only one level of equilibrium when, MC becomes more than MR after, vthe equilibrium. Because if MC is, more than MR, then producing, beyond that level will reduce, profits. But, if MC is less than MR, beyond MC = MR level, then it is, always possible to increase profits, , by producing more output.

Page 5 :
Producer's equilibrium, (When prices remain, constant), , When price remain constant, firm, can sell any quantity of output at, the price fixed by the market., Here, Price = AR =MR. Producer, will produce that level of output, where MC = MR and after that, MC is more than MR., , Output Price TR TC MR, , 1 10 10 12 = 10, 2 10 20 22 10, 3 10 30 30 = 8610, - 10 40 40 10, 5 10 50 52 10, , 6 10 60 66 10, , , , MC, , 12, , 10, , 10, , 12, , 14