Question

From the following information about a firm, find the firm's equilibrium output in terms of marginal cost and marginal revenue. Give reasons. Also find profit at this output.

Output (units)	Total Revenue (Rs)	Total Cost (Rs.)
$1$	$6$	$7$
$2$	$12$	$13$
$3$	$18$	$18$
$4$	$24$	$22$
$5$	$30$	$28$
$6$	$36$	$35$

Answer 1

Output (Units)	Total Revenue (Rs.)	Total Cost (Rs.)	Marginal Revenue $\left(MR\right)(Rs.)$	Marginal Cost $\left(MC\right)(Rs.)$	Profit (Rs.) $(\pi =TR-TC)$
$1$	$6$	$7$	$6$	$7$	$-1$
$2$	$12$	$13$	$6$	$6$	$-1$
$3$	$18$	$18$	$6$	$5$	$0$
$4$	$24$	$22$	$6$	$4$	$2$
$5$	$30$	$28$	$6$	$6$	$2$
$6$	$36$	$35$	$6$	$7$	$1$

Producer's equilibrium is achieved when output level is $5$ units.
Reason : At output level $2nd$ and $5th$ units, $MR$ and $MC$ are equal $(=6)$. But the producer is in equilibrium when $5$ units of output are produced. Because, it is here only that: (i) $MR=MC$, and (ii) $MC$ is rising.
When $5$ units of output are produced, $TR=Rs.30$ and $TC=Rs.28$
$Profit=TR-TC$
$Profit=Rs.30-Rs.28=Rs.2$
$\therefore Profit=Rs.2$.