Explain the equilibrium of a firm in perfect competition?

Question: Explain the equilibrium of a firm in perfect competition?

In perfect competition, the equilibrium of a firm occurs at the point where its marginal cost (MC) equals its marginal revenue (MR), which is also equal to the market price. At this point, the firm is producing the optimal level of output where the marginal cost of producing one more unit is exactly equal to the marginal revenue earned from selling that additional unit. This ensures that the firm is maximizing its profits and operating efficiently. If the market price is above the equilibrium point, then the firm will increase its output to earn more profits. Conversely, if the market price is below the equilibrium point, the firm will decrease its output to minimize its losses. In perfect competition, the equilibrium point ensures that all firms in the market are operating efficiently and earning normal profits in the long run.

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