Answer:
break even point = 8000 socks produced or $36000 in costs
Step-by-step explanation:
the cost function of the firm is
total cost = fixed cost + variable cost = $20000 + $2*Q
where Q= number of socks
the revenue from sales is
sales = Price* Q = $4.50*Q
the break even point is reached when the net profit is = 0 ( that is, the total cost is equal to the revenue from sales) , then
total cost = sales
$20000 + $2*Q =$4.50*Q
Q= $20000/($4.50-$2) = 8000 socks
that represents
total cost = $20000 + $2*8000 = $36000
then
break even point = 8000 socks produced or $36000 in costs
