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Lot’s Wife Manufacturing produces rear-view video systems for buses. The firm’s cost function is TC = 2,000 + 120 Q. If the systems sell for $145, what is the break-even rate of production?

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ogorwyne

Answer:

80

Explanation:

in this question we have the cost function to be

TC = 2,000 + 120 Q.

breakeven point is at total cost = total revenue

total revenue = p*q

= 145 *Q= 145Q

tc = total cost = 145Q

145Q = 2000 + 120Q

We collect like terms from this equation above

145Q-120Q= 2000

25Q = 2000

divide through by 25

Q = 2000/25

q = 80

the breakeven rate of production is 80 quantities.

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