Lowest market price at which firm attain break-even level.
Answer to Problem 2CYU
The market price should be equal to the
Explanation of Solution
Given Information:
Total cost is $500
Total quantity produced is 50
Calculation:
Average total cost can be determined by dividing the total cost with the number of products produced. It is shown below:
.The firm will earn profit if it sells their products at the price above $10. This is because the product’s average total cost is $10. Suppose, market price is $15 then the firm earns $5 as the profit. In case, if the market price is $8 then in such condition firm will incur losses. The lowest market price should be $10 so that firm can attain its break-even point.
Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.
Chapter 58 Solutions
Krugman's Economics For The Ap® Course
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