Please refer to Economics Producer Equilibrium Class 12 Economics Notes and important questions below. The Class 12 Economics Chapter wise notes have been prepared based on the latest syllabus issued for the current academic year by CBSE. Students should revise these notes and go through important Class 12 Economics examination questions given below to obtain better marks in exams
Producer Equilibrium Class 12 Economics Notes and Questions
The below Class 12 Producer Equilibrium notes have been designed by expert Economics teachers. These will help you a lot to understand all important topics given in your NCERT Class 12 Economics textbook.
Question. Define producer equilibrium.
Ans. It refers to that situation where a producer gets maximum profit at a particular output level with no desire to change from such situation.
Question. Explain the concept of producer equilibrium using MR and MC approach under perfect competition.
Ans. Producer equilibrium refers to that situation where a producer gets maximum profit at a particular output level with no desire to change from such situation.
Using MR and MC approach, producer equilibrium is attained where following two conditions are satisfied.
(i) MR should be equal to MC
(ii) MC must be rising or MC curve intersect MR from below or after MR=MC, MC exceeds MR.
If condition of MR=MC is not satisfied, following changes will arise.
1. If MR>MC at a particular output level, it means addition in revenue by selling one more unit is more than additional cost of producing one more unit. Thus, it will increase profit. So, producer will increase the production till MR=MC.
2. If MR<MC at a particular output level, it means addition in revenue by selling one more unit isless than additional cost of producing one more unit is less than additional cost of producing one more unit. Thus, it will decrease profit. So, producer will decrease the production tillMR=MC.
It is explained with the help of following hypothetical schedule and diagram of perfect competitive firm.
In the above table, producer attains equilibrium at output level 6 with maximum gross profit of ₹11 where MR=MC and MC is rising.
Graphically, it is shown by point ‘E’ with output level OQ, where above two conditions are satisfied.
Question. Explain the concept of producer’s equilibrium using MR and MC approach under imperfect competition.
Ans. Producer equilibrium refers to that situation where a producer gets maximum profit at a particular output level with no desire to change from such situation.
Using MR and MC approach, producer equilibrium is attained where following two conditions are satisfied.
(i) MR should be equal to MC
(ii) MC must be rising or MC curve intersect MR from below or after MR=MC, MC exceeds MR.
If condition of MR=MC is not satisfied, following changes will arise.
1. If MR>MC at a particular output level, it means addition in revenue by selling one more unit is more than additional cost of producing one more unit. Thus, it will increase profit. So, producer will increase the production till MR=MC.
2. If MR<MC at a particular output level, it means addition in revenue by selling one more unit is less than additional cost of producing one more unit is less than additional cost of producing one more unit. Thus, it will decrease profit. So, producer will decrease the production till MR=MC.
It is explained with the help of following hypothetical schedule and diagram of imperfect competitive firm.
In the above table, producer attains equilibrium at output level 5, where MR=MC and MC must be rising. Graphically, it is shown by point ‘E’ and output level OQ, where MR=MC and MC must be rising.
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