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Chapter 8: Q.20 (page 212)

What two lines on a cost curve diagram intersect at the zero-profit point?

Short Answer

Expert verified

The zero profit point denotes the moment at which the company makes no money.

Step by step solution

01

Zero profit point :

The zero profit point denotes the moment at which the company makes no money. It is the point at which the cost of producing a certain level of output is precisely equal to the price at which the business sells its product.

02

Explanation : 

We can see from the diagram that at the lowest point AC, MC cuts AC since MC is increasing significantly quicker than AC. The intersection of the average revenue and marginal cost curves is the zero profit point.

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Most popular questions from this chapter

Finding a life partner is a complicated process that may take many years. It is hard to think of this process as being part of a very complex market, with a demand and a supply for partners. Think about how this market works and some of its characteristics, such as search costs. Would you consider it a perfectly competitive market?

Will a perfectly competitive market display productive efficiency? Why or why not?

Firms in a perfectly competitive market are said to be “price takers”—that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?

A firm’s marginal cost curve above the average variable cost curve is equal to the firm’s individual supply curve. This means that every time a firm receives a price from the market it will be willing to supply the amount of output where the price equals marginal cost. What happens to the firm’s individual supply curve if marginal costs increase?

How does a perfectly competitive firm calculate total revenue?
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