Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000.
-Refer to the scenario above.A firm producing Good Y will ________.

Question

Quizplus · Accepted Answer

To calculate the break-even price, we need to add the fixed cost and variable cost and divide it by the number of units produced. 
Total cost = Fixed cost + Variable cost = $25,000 + $60,000 = $85,000 
Break-even price = Total cost / Number of units produced = $85,000 / 500 = $170 
Therefore, the firm will earn zero economic profits if it charges a price of $170. If it charges a higher price than the break-even price, it will earn economic profits, and if it charges a lower price, it will incur losses. The information provided in the scenario does not give us enough information to determine if the firm will shut down production if the price falls below $200.

Scenario: the Fixed Cost of Producing 500 Units of Good