Microeconomics Quiz No. 3 [Read-Only-word (Product Act ration Failed FERENCES MA
ID: 1116412 • Letter: M
Question
Microeconomics Quiz No. 3 [Read-Only-word (Product Act ration Failed FERENCES MAILINGS REVIEW VIEW | .EE . ||TNormal TN0 Spac.., Heading 1 Heading 2 Title Paragraphh Styles Suppose that you are a consultant to a book publisher. Suppose that the firm is about to publish a book that will sell for $10.00 a copy. The fixed costs of publishing the books are $5,000 and the variable cost is $5.00 a copy. What is the break even point for this book? (4 points) 5. If the price were $8.00 rather than the $10.00 described above, what would be the point?Explanation / Answer
Breakeven point is defined as a point where total revenue equals total cost and profit becomes zero. At this point the firm would be able to cover all its cost and can start to earn profits thereafter.
The formula,
Breakeven quantity = Fixed Cost/(Price-Variable Cost)
= 5000/(10-5)
= 5000/5 = 1000
If the price is $8.00 then,
The formula,
Breakeven quantity = Fixed Cost/(Price-Variable Cost)
= 5000/(8-5)
= 5000/3 = 1667