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Equilibrium output is determined by:
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- the equality between total Variable cost and Marginal revenue.
- the equality betweem Marginal cost and Marginal revenue.
- the equality between Average cost and Average revenue.
- the equality between total cost and total revenue.
- the equality between total Variable cost and Marginal revenue.
Correct Option: B
Equilibrium Output refers to the level of output where the Aggregate Demand is equal to the Aggregate Supply (AD = AS) in an economy. It signifies that whatever the producers intend to produce during the year is exactly equal to what the buyers intend to buy during the year. According to MR-MC approach, equilibrium refers to stage of that output level at which Marginal Cost (MC) = Marginal Revenue (MR). As long as MC is less than MR, it is profitable for the producer to go on producing more because it adds to its profits. He stops producing more only when MC becomes equal to MR.
