Question

"The break-even point is reached when total revenue is ______ total costs.

A.greater than
B.less than
C.equal to"

Answer 1

The break-even point occurs when total revenue is equal to total costs, resulting in neither profit nor loss for the firm.

Step-by-step explanation:

The break-even point is reached when total revenue is equal to total costs. At this point, a company neither makes a profit nor suffers a loss on the products or services it offers. If a firm sets a price that is too low, the total revenue may be less than the total costs at all levels of output, resulting in losses for the business.

Conversely, if the price is set above the average cost, the firm may make economic profits, as total revenues will be greater than total costs. Profit-maximizing firms aim to set prices and output levels where the gap between total revenues and total costs is the largest, maximizing their profits.