Final answer:
When a firm's sales volume exceeds the break-even point, it will experience an operating profit, as the break-even point is where revenue equals costs and profits are zero. Above this point, total revenues will exceed total costs, leading to profitability.
Step-by-step explanation:
If sales volume exceeds the break-even point, the firm will experience an operating profit. The break-even point is when a firm's revenue equals its costs. Specifically, at this point, the price is equal to the average cost (AC), and the firm is essentially breaking even, with zero profits. Operating below this point means the firm is incurring losses and must decide whether to continue to produce (incurring further losses) or shutdown to minimize losses.
Above the break-even point, when prices are higher than average costs, the firm earns a profit in the short run. Therefore, if the price is more than adequate to cover the variable costs and any price above the level where marginal cost (MC) crosses AC, the firm can expect profitability. Essentially, when the sales volume and price are such that total revenues exceed total costs, operating profits are generated.