Concept: A firm reaches equilibrium when it maximises profit, which requires two conditions to be satisfied.
Explanation:The first condition is that marginal cost must equal marginal revenue, i.e.
MC=MR.
But this condition alone is not enough because
MC=MR can also occur at the point of minimum profit.
The second and sufficient condition is that the marginal cost curve must cut the marginal revenue curve from below.
This means that after the point of intersection,
MC must be greater than
MR, so profit is maximised and not minimised.
Thus, the sufficient condition is correctly stated by the option that says the marginal cost curve cuts the marginal revenue curve from below.
Answer: B. marginal cost curve cuts the marginal revenue curve from below