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Why MC is rise ?

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Why MC is rise ?

Posted by Nikhil Kumar 7 years ago

CBSE > Class 12 > Economics

1 answers

Cbse Student 7 years ago

Falling MC means that the cost of producing an additional unit of output tends to reduce. In a situation, when price is constant (as under perfect competition) this would mean a situation when the difference between the firm’s TR and TVC tends to increase. This means a situation when firm’s gross profit (TR-TVC) tends to rise. So, this will motivate the producer to produce more. Therefore, equilibrium is never struck in a situation of falling MC.

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