The cost function is a function which determines the total cost incurred by the production of a certain number of units produced. The revenue function is a function which determines the total revenue earned by selling the produced units. Break even point where the total costs are equal to the total revenue. It is a quantity where there is no profit or no loss. Since the total costs are equal to the total revenue, therefore both the equations can be equated. Therefore:
C = 20n + 500 and R = 25n implies that 25n = 20n + 500.
Solving this equation gives:
5n = 500
n = 100.
This means that the break even output is 100 units. So n = 50 will lie in the loss section since 50 is less than 100. Option B is the correct answer!!!
