Bundle: Managerial Economics, Loose-leaf Version, 5th + MindTap Economics, 1 term (6 months) Printed Access Card
5th Edition
ISBN: 9781337607995
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Question
Chapter 5, Problem 1MC
To determine
The increasing factor of the break-even quantity.
Expert Solution & Answer
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:
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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