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hi ilibrit f mM), A competitive firm is in equilibrium when it gets maximum profit. For the, maximisation of profit, the following conditions are necessary., 1) The market price, p = MC, marginal cost.(p = M R = MC), 2) MC is non decreasing., 3) p2AVC (Average variable cost)., The following figure explains the short run profit maximisation of a competitive firm., , , , , , In the figure, the firm is in equilibrium at point A. At this point,, 1) p= MC., 2) MC is non decreasing., 3)p2AVC., At point A, market price of output is p and quantity of output is q1., In equilibrium, the firm gets maximum profit of the area of recangle A B E P in the figure. The, profit of the firm can be calculated as;, Profit,n = TR-TC, TR= pq, = OP X Oql., = area of rectangle O PA ql., TC=ACXq, = Bql X Oql, area of rectangle O E B ql., area of rectangle O P A qi - area of rectangle O E B ql, = area of ABEP., , , , Profit