Question

In a perfect competition, the firm will be in equilibrium when ______________________.

• A. MC = MR
• B. The MC curve should cut MR curve from below
• C. Either (A) or (B)
• D. Both (A) and (B)

Answer 1

The correct option is D Both (A) and (B)

Short run equilibrium of a firm in perfect competition is achieved when marginal cost(MC) is equal to the marginal revenue(MR) which means that the change in total revenue if an additional unit of output is sold is equal to the change in total cost if an additional unit of the same output is produced and after this point the marginal must be rising and greater than marginal revenue so MC curve should cut MR curve from below.