The breakeven quantity for a firm is that quantity where

Question

Quizplus · Accepted Answer

The breakeven quantity is the quantity at which a firm is earning exactly zero economic profits. At this quantity, the price (P) that the firm is selling at is equal to the average total cost (ATC) of producing that quantity. Therefore, the correct choice is D, where P = ATC. Choice A is incorrect because the breakeven quantity does not necessarily correspond to the quantity where a firm maximizes profits. Choice B is incorrect because P = MC is the quantity at which the firm should produce to maximize profits, not the quantity at which the firm breaks even. Choice C is incorrect because the breakeven quantity corresponds to zero economic profits, not positive economic profits. Choice E is incorrect because AFC does not play a role in the determination of the breakeven quantity.

The Breakeven Quantity for a Firm Is That Quantity Where