Chapter 1, Problem 5P

Break-Even Analysis

We discussed linear demand curves in Section 1.3. Demand curves normally apply to an entire industry or to a monopolist—-that is, a manufacturer so large that the quantity that it supplies affects the market price of the commodity. We discussed linear cost curves in Section 1.2. In this chapter project, we combine demand curves and cost curves with least-squares lines to determine break-even points.

Assuming that the manufacturer has fixed costs of $8,000,000 and that the variable cost of producing each thousand cameras is $100,000, find the equation of the cost curve.