Question

A firm will break even where ______ will just cover ______ because the revenue per unit and the average total cost per unit are equal.

Multiple choice question.

marginal cost; marginal revenue
total revenue; total cost
total revenue; marginal cost
marginal revenue; total cost

Answer 1

A firm will break even where total revenue will just cover total cost because the revenue per unit and the average total cost per unit are equal.

Step-by-step explanation:

A firm will break even where total revenue will just cover total cost because the revenue per unit and the average total cost per unit are equal.

In perfect competition, the profit-maximizing firm chooses the output level where price or marginal revenue, which are the same thing, is equal to marginal cost.

For example, if the market price faced by a perfectly competitive firm is above average cost at the profit-maximizing quantity of output, then the firm is making profits. If the market price is below average cost at the profit-maximizing quantity of output, then the firm is making losses.