A firm is in equilibrium when it has no propensity to modify its level of productivity. It requires neither extension nor retrenchment. It wants to earn maximum profits in by equating its marginal cost with its marginal revenue, i.e. MC = MR. Diagrammatically, the conditions of equilibrium of the firm are (1) the MC curve must equal the MR curve.
This is the first order and essential condition. But this is not a sufficient condition which may be fulfilled yet the firm may not be in equilibrium. (2) The MC curve must cut the MR curve from below and after the point of equilibrium it must be above the MR.
This is the second order condition. Under conditions of perfect competition, the MR curve of a firm overlaps with the AR curve. The MR curve is parallel to the X axis. Hence the firm is in equilibrium when MC = MR = AR.
The first order figure (1), the MC curve cuts the MR curve first at point X. It contends the condition of MC = MR, but it is not a point of maximum profits for the reason that after point X, the MC curve is beneath the MR curve. It does not pay the firm to produce the minimum output OM when it can earn huge profits by producing beyond OM. Point Y is of maximum profits where both the situations are fulfilled.
Amidst points X and Y it pays the firm to enlarges its productivity for the reason that it's MR > MC. It will nevertheless stop additional production when it reaches the OM1 level of productivity where the firm fulfils both the circumstances of equilibrium. If it has any plants to produce more than OM1 it will be incurring losses, for its marginal cost exceeds its marginal revenue beyond the equilibrium point Y. The same finale hold good in the case of straight line MC curve and it is presented in the figure (2).
An industry is in equilibrium, first when there is no propensity for the firms either to leave or either the industry and next, when each firm is also in equilibrium. The first clause entails that the average cost curves overlap with the average revenue curves of all the firms in the industry.
They are earning only normal profits, which are believed to be incorporated in the average cost curves of the firms. The second condition entails the equality of MC and MR. Under a perfectly competitive industry these two circumstances must be fulfilled at the point of equilibrium i.e. MC = MR…. (1), AC = AR…. (2), AR = MR. Hence MC = AC = AR. Such a position represents full equilibrium of the industry.
Short Run Equilibrium of the Firm and Industry
A firm is in equilibrium in the short run when it has no propensity to enlarge or contract its productivity and needs to earn maximum profit or to incur minimum losses.
The short run is an epoch of time in which the firm can vary its productivity by changing the erratic factors of production. The number of firms in the industry is fixed since neither the existing firms can leave nor new firms can enter it.
Postulations
The short run equilibrium of the firm can be described with the helps of marginal study and total cost revenue study.
An industry is in equilibrium in the short run when its total output remains steady there being no propensity to enlarge or contract its productivity. If all firms are in equilibrium the industry is also in equilibrium. For full equilibrium of the industry in the short run all firms must be earning normal profits.
But full equilibrium of the industry is by sheer accident for the reason that in the short rum some firms may be earning super normal profits and some losses. Even then the industry is in short run equilibrium when its quantity demanded and quantity supplied is equal at the price which clears the market.
a decrease in equilibrium price and an increase in equilibrium quantity
A decrease in input costs to firms in a market will result in
When the demand for goods and services is equal to the goods and services offered (supplied) by firms in the public and private sector of the economy.
why do firm stay in business if profit is=0In economic profit is revenue minus all costs,including implicit costs,like the opportunity cost of the owner's time and money.In the zero profit equilibrium,firms earn enough revenue to cover these costs.by Abdul hanan tareen
The two conditions of equilibrium are: 1. Concurrent Equilibrium the sum of vector forces through a point is zero. 2. Coplanar equilibrium, the sum of forces in a plane is zero and the sum of the torques around the axis of the plane is zero. These two conditions are similar to Ohms Laws in Electricity: Ohms Node Law the sum of the currents at a node is zero and Ohms Voltage law, the sum of the voltages around a loop is zero. These equilibrium conditions reflect the Quaternion mathematics that controls physics. Quaternions consist of a scalar or real number and three vector numbers. Equilibrium is the Homogeneous condition of a quaternion equation: the sum of the scalars or real numbers must be zero AND the sum of the vector numbers must also be zero. Thus there are TWO Conditions for Equilibrium. However if we were to use quaternions as nature does, then Equilibrium would be simplified to the zero quaternion condition.
a decrease in equilibrium price and an increase in equilibrium quantity
An equilibrium constant
An equilibrium constant
Firms employ fewer workers than they would at the equilibrium wage.
A decrease in input costs to firms in a market will result in
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Equilibrium means that an object will stay at rest or not accelerate; the conditions are the net force is zero and the net moment about any point is zero.
At equilibrium the concentrations of reactants and productas remain constant.
At equilibrium the concentrations of reactants and productas remain constant.
It is in equilibrium when the two conditions are satisfied - there is no net translational equilibrium and no net rotational equilibrium. For translational equilibrium, the summation of forces acting on the matter must equate to zero, which means that there is no resultant force. For rotational equilibrium, the sum of moments must be zero, which means there is no resultant torque. When these two conditions are met, the object will be stationary, i.e. it is in a state of equilibrium.
There is balance: demand equals supply (in economics). Prices are stabilized. Risks for firms are reduced to a minimum.
Mutation cannot occur