Question

1. Briefly describe what a “zero profit point” is. and give at least 2 examples.

Answer 1

Zero profit condition is the condition that occur when an industry or type of business has an extremely low cost of entry to or exit from the industry.In this situation some firm's not already in the industry tend to join the industry if they calculate that they will make a positive Economic profit.Zero profit point is where MC crosses AC is called Zero profit point.If the firm is operating at a level of output where the market price is at a level higher than the zero profit point then price will be greater than average cost and the firm is earning profits.