MANAGERIAL ECONOMICS (LOOSELEAF)
MANAGERIAL ECONOMICS (LOOSELEAF)
5th Edition
ISBN: 9781337571371
Author: FROEB
Publisher: CENGAGE L
Question
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Chapter 5, Problem 1MC
To determine

The increasing factor of the break-even quantity.

Expert Solution & Answer
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Explanation of Solution

Option (c)

The break-even point refers to a point in the level of operations at which a company experiences that its revenue generated is equal to its cost incurred. The break-even point can be calculated using the following formula:

Break-even point=Fixed costPiceMarginal cost        (1)

As per Equation (1), a decrease in the price level will decrease the denominator and thereby increase the break-even quantity. Therefore, a fall in the price level will increase the break-even quantity and thus, option (c) is correct.

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