Question

The producer strikes his equilibrium only when $MP$ is diminishing.

• A. True
• B. False

Answer 1

The correct option is A True

A producer strikes his equilibrium only when $MP$ is diminishing, where the $MC$ is simultaneously rising. The producer stops production when rising $MC$ matches with falling $MR$. Beyond this point, rising $MC$ would exceed $MR$, causing loss of profit.