Question

If the first copy cost of a music video is​ $223,000 and the marginal cost is​ $0, then how many copies should the firm sell in order to break even if the price was​ $10 each?

Answer 1

Question:

If the first copy cost of a music video is​ $223,000 and the marginal cost is​ $0, then how many copies should the firm sell in order to break even if the price was​ $10 each?

A) 2,230

B) 223,000

C) Zero

D) 22,300

Answer:

The correct answer is B.

Explanation:

Step 1 - Relationship between Marginal Cost and Break Even Price (BEP)

This is given as:

BEP =     $\frac{Fixed Cost}{1-(Marginal Cost Per Unit/Selling Price Per Unit)}$

Step Two

First compute the denominator

= 1-(0/10)

= 1-0

= 1

Step 3

Therefore BEP = 223,000/1

=  $223,000

Cheers!