Answer to Question #54324 in Microeconomics for Daniyal Ahmed

Question

The AVC of producing an instrument comes to Rs.2P units and Fixed Cost of Rs.90000. Find the Break even point if the instrument sells for Rs.20 per unit.

Answer 1

The break-even level or break-even point (BEP) represents the sales amount—in either unit or revenue terms—that is required to cover total costs (both fixed and variable). Total profit at the break-even point is zero.
X = TFC/(P - AVC) = 90000/(20 - 0.2*20) = 90000/16 = Rs 5625