Why MC cuts MR from below
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Posted by Abhishek Singh 6 years, 9 months ago
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Gaurav Seth 6 years, 9 months ago
For producer's equilibrium MR should be equal to MC and MC should cut MR from below, i.e, the slope of MC must be positive at the point of intersection. Such a point indicates the level of output where the firms earns maximum possible profits. On the other hand, if the MC cuts the MR from above, i.e. MC is negatively sloped, then this indicates that profits can be further increased by increasing the level of production. Hence, it would not be the point of profit maximisation.
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