Question : Equilibrium out is determined by:
Option 1: the equality between total variable cost and marginal revenue
Option 2: the equality between Marginal cost and Marginal revenue
Option 3: the equality between Average cost and Average revenue
Option 4: the equality between total cost and total revenue
Correct Answer: the equality between Marginal cost and Marginal revenue
Solution : The correct option is the equality between total cost and total revenue .
A company maximises its profit in a competitive market by generating the amount of production where the difference between total revenue and the total cost is the greatest. At the equilibrium point, the company generates the amount of production where total revenue and total cost are equal.
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