Production and cost — Economics STD 11 Commerce — Question

Producer’s Equilibrium:Equilibrium refers to a state of rest when no change is required. A firm (producer) is said to be in equilibrium when it has no inclination to expand or to contract its output. This state either reflects maximum profits or minimum losses.
Total Revenue-Total Cost Approach (TR-TC Approach):
According to TR-TC approach, producer’s equilibrium refers to stage of that output level at which the difference between TR and TC is positively maximised and total profits fall as more units of output are produced. So, two essential conditions for producer’s equilibrium are:

• The difference between TR and TC is positively maximised.
• Total profits fall after that level of output.

1. Producer’s Equilibrium (When Price remains Constant):

Output (units)	Price (Rs.)	TR (Rs.)	TC (Rs.)	Profit = TR - TC (Rs.)	Remarks
0	10	0	5	-5	Profit rises with increase in output
1	10	10	8	2
2	10	20	15	5
3	10	30	21	9
4	10	40	31	9	Producer’s Equilibrium Profit falls with increase in output
5	10	50	42	8
6	10	60	54	6

2. Producer’s Equilibrium (When Price Falls with rise in output):

Output (units)	Price (Rs.)	TR (Rs.)	TC (Rs.)	Profit = TR-TC (Rs.)	Remarks
0	10	0	2	-2	Profit rises with increase in output
1	9	9	5	4
2	8	16	9	7
3	7	21	11	10
4	6	24	14	10	Producer’s Equilibrium Profit falls with increase in output
5	5	25	20	5
6	4	24	27	-3