Question

What is meant by producer's equilibrium?

Hint:

Producer's equilibrium is the "sweet spot" of production where profit is maximized, achieved when the cost of the last unit equals the revenue from it (MC=MR).

Answer 1

A producer (or a firm) is in equilibrium when it produces the level of output that gives it the maximum possible profit. At this point, the producer has no incentive to either increase or decrease its output. The state of equilibrium is achieved when two conditions are met:

Marginal Revenue equals Marginal Cost (MR = MC).
The Marginal Cost curve cuts the Marginal Revenue curve from below.