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Please draw the graph for a monopolistically competitive firm operating at break even. Be sure to...

Please draw the graph for a monopolistically competitive firm operating at break even. Be sure to include ATC, AVC, MC, and Price/MR as well as show Q*.

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Answer #1

Break even point of a monopolistically competitive firm

  • This is a point where price is equal to average cost or P = AC
  • At this price, the firm is covering all of its economics profits.
  • In economics, when a firm is at a break even point it is said to be earning normal profit.

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If this firm reciving a price of $10 and is selling a quantity of 300 units, then the Total Revenue is equal to the price times of Quantity (P * Q) = $3000.

We should also see that in this case as the price of $10 cuts the ATC curve, then $10 is also the average cost of the output level of 300 units.

The total Cost is (C * Q) = $3000

So, we have toal revenue(TR) and Total Cost(TC)

Profit = (TR - TC) = $(3000 -3000) = $0 or Break Even Point

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