Exhibit 7-15 Short-run cost curves for E-Z Care lawn mowing company

In Exhibit 7-15, what market price would cause E-Z-Care to just break even?

Question

Exhibit 7-15 Short-run cost curves for E-Z Care lawn mowing company

In Exhibit 7-15, what market price would cause E-Z-Care to just break even?

Quizplus · Accepted Answer

The break-even point occurs where the total revenue curve intersects the total cost curve. Based on the graph, the break-even point for E-Z Care is where the total cost curve intersects the Y-axis, which is at an output of 100 lawns per week. At this output level, the total cost is $600. To find the market price that would cause E-Z Care to break even, we look for the point where the total revenue curve intersects the total cost curve, which occurs at a price of $12 per lawn. At this price, E-Z Care would earn $1,200 in total revenue (100 lawns x $12 per lawn), which is equal to their total cost of $600, resulting in zero economic profit. Therefore, the answer is C.

Exhibit 7-15 Short-Run Cost Curves for E-Z Care Lawn Mowing