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Question
The diagram given below shows the equilibrium of a producer:
(i) Find out whether it is the equilibrium of a purely competitive producer or a producer under monopoly.
(ii) What is the equilibrium level of output?
(iii) Find out the profits at the equilibrium level of output.
The diagram given below shows the equilibrium of a producer:
(i) Find out whether it is the equilibrium of a purely competitive producer or a producer under monopoly.
(ii) What is the equilibrium level of output?
(iii) Find out the profits at the equilibrium level of output.
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Solution
(i) The diagram shows the equilibrium of a perfectly competitive producer.
(ii) OQ is the equilibrium level of output because profit is maximum at this level of output.
(iii) Profit = RQ - CQ = RC
(i) The diagram shows the equilibrium of a perfectly competitive producer.
(ii) OQ is the equilibrium level of output because profit is maximum at this level of output.
(iii) Profit = RQ - CQ = RC
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