When economists refer to a firm breaking even, they mean that the price the firm receives is high enough that the firm's revenue covers ________. Oil executives frequently use the term "breaking even" in a different way, where the term means that the price of oil is just high enough that the firm's revenue is equal to the ________ of pumping oil from a particular well.

Question

Quizplus · Accepted Answer

Economists use "breaking even" to mean that a firm's revenue covers all of its costs, including both fixed and variable costs, as well as the opportunity cost of the firm's investment. Oil executives, however, often use the term to mean that the revenue equals the variable costs of pumping oil from a specific well, not including fixed costs or opportunity costs.

When Economists Refer to a Firm Breaking Even, They Mean