Question

With the help of the table given below, find producer's equilibrium using $MR$ and $MC$ approach. Give reason for your answer.

Output (Units)	$TR(Rs.)$	$AC(Rs.)$
$1$	$20$	$20$
$2$	$40$	$15$
$3$	$60$	$12$
$4$	$80$	$10$
$5$	$100$	$12$
$6$	$120$	$15$

Answer 1

Output (Units)	$TR(Rs.)$	$MR(Rs.)$	$AC(Rs.)$	$TC(Rs.)$	$MC(Rs.)$	Profit (Rs.) $(\pi =TR-TC)$
$1$	$20$	$20$	$20$	$20$	$20$	$0$
$2$	$40$	$20$	$15$	$30$	$10$	$10$
$3$	$60$	$20$	$12$	$36$	$6$	$24$
$4$	$80$	$20$	$10$	$40$	$4$	$40$
$5$	$100$	$20$	$12$	$60$	$20$	$40$
$6$	$120$	$20$	$15$	$90$	$30$	$30$

Producer's equilibrium is struck when output level $=5units$.
Reason: At output levels $1st$ and $5th$ units, both $MR$ and $MC$ are equal, which is equal to $20$ in both the cases. But producer is in equilibrium at $5th$ unit only where profit is maximum $=\left(40\right)$.