Producer’s Equilibrium MCQ — Class 11

Producer

Producer: an economic unit that organises production of goods or services for sale

Profit

Profit: the excess of total revenue over total cost

Producer equilibrium

Producer equilibrium: the output level at which the producer maximises profit or minimises loss and has no incentive to change output

First MR–MC condition

First MR–MC condition: at equilibrium marginal revenue must equal marginal cost

Second MR–MC condition

Second MR–MC condition: marginal cost must be rising or cut marginal revenue from below at the equilibrium output

MR greater than MC

MR greater than MC: when marginal revenue exceeds marginal cost, producing an additional unit adds to profit so output should expand

MC greater than MR

MC greater than MR: when marginal cost exceeds marginal revenue, the extra unit reduces profit so output should contract

Normal-profit equilibrium logic

Normal-profit equilibrium logic: producer equilibrium depends on marginal comparison and can occur even when economic profit is only normal

Loss-minimising equilibrium

Loss-minimising equilibrium: in the short run a producer can be in equilibrium while incurring a loss if changing output would make the loss larger

Profit-maximisation rule

Profit-maximisation rule: output should be adjusted until the additional revenue from the last unit equals its additional cost with the stability condition satisfied

1. Which concept best matches this situation? A firm combines labour and capital to make products.

1. Profit
2. Producer
3. First MR–MC condition
4. MC greater than MR

2. Which concept best matches this situation? TR ₹1,000 minus TC ₹800 gives profit ₹200.

1. Producer equilibrium
2. Second MR–MC condition
3. Profit
4. Normal-profit equilibrium logic

3. Which concept best matches this situation? Changing output in either direction would reduce the producer’s objective.

1. First MR–MC condition
2. MR greater than MC
3. Loss-minimising equilibrium
4. Producer equilibrium