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Chapter 8: Q.20 (page 212)

What two lines on a cost curve diagram intersect at the zero-profit point?

Short Answer

Expert verified

The zero profit point denotes the moment at which the company makes no money.

Step by step solution

01

Zero profit point :

The zero profit point denotes the moment at which the company makes no money. It is the point at which the cost of producing a certain level of output is precisely equal to the price at which the business sells its product.

02

Explanation : 

We can see from the diagram that at the lowest point AC, MC cuts AC since MC is increasing significantly quicker than AC. The intersection of the average revenue and marginal cost curves is the zero profit point.

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Most popular questions from this chapter

Explain in words why a profit-maximizing firm will not choose to produce at a quantity where marginal cost exceeds marginal revenue.

Briefly explain the reason for the shape of a marginal revenue curve for a perfectly competitive firm.

Why does exit occur?

How does the average cost curve help to show whether a firm is making profits or losses?

Can you name five examples of perfectly competitive markets? Why or why not?
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