Final answer:
The single point where the total revenue line crosses the total expense line on the CVP graph indicates the break-even point, where the firm makes zero profits. This is due to the total revenue being exactly equal to the total expenses at this point.
Step-by-step explanation:
The single point where the total revenue line crosses the total expense line on the CVP (Cost-Volume-Profit) graph indicates the break-even point. At this point, the firm is making zero profits since the total revenue is exactly equal to the total expenses. This break-even analysis is based on the behavior of the firm's costs and the revenue it generates at different levels of output.
According to the information provided, we can divide the marginal cost curve into three zones on the basis of where it is crossed by the average cost (AC) and average variable cost (AVC) curves. The break-even point is where MC (Marginal Cost) crosses AC. If the market price is higher than the break-even point, the firm is earning profits. If the price is exactly at the break-even point, the firm is making zero profits, which answers the student's question. Should the price drop below the break-even point but remain above the shutdown point (where MC crosses AVC), the firm will incur losses in the short run but will continue to operate since it covers its variable costs.