Question

A perfectly competitive firm has the cost function TC = 1000 + 2Q + 0.1 Q2. What is the lowest price at which this firm can break even?

Answer 1

Answer:

Concept & example of breakeven point

Explanation:

Break Even point is where, Total Revenue = Total Cost. So, dividing entire equation by Q, Average Revenue ie Price = Average Cost.

TC = 1000 + 2Q + 0.1 Q^2 , AC = TC / Q , AC = 1000 / Q + 2 + 0.1Q      Lowest Price ie AR for breakeven, is where P = AC. So, P = 1000/Q + 2 + 0.1Q

Eg : For quantity Q = 100, minimum price for breakeven, at P = AC is     (1000 / 100) + 2 + 0.1 (1000) = 100 + 2 + 100 = 202