- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 4. Breakeven Analysis and Shutdown Decision
CFA Practice Question
The break-even point is the output level at which ______
B. marginal cost equals marginal revenue.
C. average cost equals average revenue.
A. total cost equals total revenue.
B. marginal cost equals marginal revenue.
C. average cost equals average revenue.
Correct Answer: A
User Contributed Comments 9
| User | Comment |
|---|---|
| awellman | doesn't the last one say the same thing as A? |
| bluefin209 | Average cost/revenue is definitely different that total cost/revenue. Look at the definitions for clarification. |
| bluefin209 | I also thought that the break-even point is when marginal cost=average total cost. |
| odette | Breakeven point equals normal profit which is TC-TR |
| MFTIOA | P*Q = MR*Q = ATC*Q = TC = TR |
| azramirza | MFTIO, Can u highlight how MR=ATC... |
| JepTang | This is to answer bluefin209's question. At the point where MC=ATC that is the point where ATC is at its minimum, if you can remember the lecture from the SS5. It is not necessarily the break even point as it those graphs will only tell you whether a firm can produce more quantity and still make profit from those marginal quantity produced. |
| Oksanata | I do not agree with Odette, I would say that Profit = TR-TC, where TC includes opportunity costs. Normal profit is when TR=TC, i.e. firm is not able to make economic profit, and this is break-even point, i.e. A is correct. |
| geofin | "In the case of perfect competition, the breakeven point is the quantity where price, average revenue, and marginal revenue equal average total cost. It is also defined as the quantity where total revenue equals total costs." CFA Institute. Level I Volume 2 Economics, 7th Edition. Pearson Learning Solutions.page120. |