Question

From the following data find out the level of output that will give the producer maximum profit (Use marginal cost and marginal revenue approach,) Give reasons for your answer

Output (units)	1	2	3	4	5
Total Cost (Rs)	9	17	24	29	36
Total Revenue (Rs)	11	20	27	32	35

Answer 1

Output (Units)	Total Revenue (Rs)	Total Cost (Rs)	MR = TRn - TRn-1	MC = TCn - TCn- 1
1	11	9	11	9
2	20	17	9	8
3	27	24	7	7
4	32	29	5	5
5	35	36	3	7

The firm would be in equilibrium when following two conditions are satisfied:

1) MR = MC

2) MC is rising or the MC curve cuts the MR curve from below

Thus, at 4 units of output, the firm is in equilibrium as both the conditions are getting satisfied at this level