Microeconomics and Pricing

If marginal revenue (MR) equals marginal cost (MC), the firm is at its profit-maximizing output level. If this level also equals average total cost (ATC), then price must be greater than ATC (since MR is less than price for a monopolist), meaning the firm earns positive economic profit.

In perfect competition, efficiency is achieved when the price consumers are willing to pay equals the marginal cost of producing the last unit. This ensures that resources are allocated according to consumer preferences.

For profit to be maximized the difference between MR and MC should be zero. If MR > MC it is profitable to increase production and when MR < MC it is profitable to decrease production. And the MC curve should intersect the MR curve from below for maximising profit in absolute terms. (Higher output will lead to larger total revenue).

Equilibrium market price is a point where the demand equals the supply for a particular commodity. Hence, in the given illustration, demand (700) is equal to supply (700) at Rs.4. Hence, it is equilibrium market price.

If demand decreases and supply increases then equilibrium quantity could go up, down, or stay the same, and equilibrium price will go down. If demand decreases and supply decreases then equilibrium quantity goes down, and the equilibrium price could go up, down, or stay the same

A change in the price of the product leads to movement along the demand curve and not a shift in the demand curve.

A monopolist maximizes profit by producing at the output level where the additional revenue from selling one more unit (MR) is exactly equal to the additional cost of producing that unit (MC).

Total Revenue (TR) is maximized when the marginal revenue (MR) is zero. Beyond this point, selling additional units would actually decrease total revenue because the price reduction required to sell more units outweighs the quantity increase.

Regardless of the market structure, profit maximization occurs where marginal revenue equals marginal cost (MR = MC). This ensures that the firm is not leaving potential profit on the table or incurring losses on marginal units.

An increase in demand while the supply remains unchanged causes equilibrium price and quantity to increase. Due to increase in demand the quantity demanded will increase this will thereby increase competition in the market which will leaf to increase in price of the product. hence, when the price increases demand decreases to reach to equilibrium and new equilibrium quantity and price will be derived. 

The condition MR = MC is used to determine the profit-maximizing output level in both the short run and the long run. However, the question specifically asks where a competitive firm can maximize profit using this rule, which applies to the short run as well.

Producer's equilibrium refers to a situation of profit maximization.
It is only when (a) MR = MC, and (b) MC is rising, these two conditions are satisfied, then a producer will reach the point of his equilibrium and maximizing his profit.

A producer strikes his equilibrium when he produces that amount of output at which the difference between total revenue and total cost is maximum. This is because, $\text{Net profit} = TR - TC$.

A producer strikes his equilibrium only when $MP$ is diminishing, where the $MC$ is simultaneously rising. The producer stops production when rising $MC$ matches with falling $MR$. Beyond this point, rising $MC$ would exceed $MR$, causing loss of profit.

If MR > MC, the firm gains more revenue from selling an additional unit than it costs to produce it. By lowering the price to increase quantity sold, the firm can capture more of this potential profit.