Question

The basic behavioural principle which apply to all market conditions ________.

• A. a firm should produce only if its TR > TVC
• B. a firm should produce at a level where its MC = MR
• C. MC curve cuts the MR curve from below.
• D. all of the above

Answer 1

The correct option is D all of the above

In every market a firm should produce either if they are earning profits or if they are able to cover up total variable cost, i.e. if total revenue is greater than total variable cost.

The firm achieves equilibrium where the marginal revenue is equal to marginal cost and the marginal cost curve cuts the marginal revenue curve from below.