Question
When does the producer earn supernormal profits?
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Answer
The producers will earn super normal profits when Average Revenue is greater than Average Cost, i.e. when $\text{AC} > \mathring{\text{A}}\text{R} \text{ or} \text{ TC} > \text{TR},$ at the point of equilibrium.
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Consuption (units)
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$1$
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$2$
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TU (utils)
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MU (utils)
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$6$ | $3$ | $0$ |
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Price per unit (₹)
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Quantity demanded (units)
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$0$
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Combination
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Good X
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Good Y
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A
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