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If a firm finds it necessary to reduce the price per unit because of increased foreign...

If a firm finds it necessary to reduce the price per unit because of increased foreign competition, then its break-even point will ( increase, decrease, or not change) . (Assume that all other factors remain unchanged.)

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Answer #1

If the firm decides to lower its price, then the total revenue of the firm declines and the total revenue curve shifts downward. With the downward shift in the total revenue curve, the new curve will intersect the total cost curve at the point which is to the right of the previous break-even point. Since the total revenue and the total cost curves are both upward sloping, this new intersection will be above the original equilibrium point.

Thus, the break-even point will increase.

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