Question

The break-even point arises when

• A. TR>TC
• B. MR>MC
• C. TR = TC
• D. Both (A) and (B)

Hint:

The break-even point occurs when total revenue equals total cost. At this point, a business does not make a profit, but also does not incur a loss.

Answer 1

The Correct Option is C

Step 1: Understanding the Break-Even Point:
The break-even point is the point at which total revenue (TR) equals total cost (TC), resulting in neither a profit nor a loss. At this point, the business covers all its costs, but does not make any profit. The formula for this condition is: \[ TR = TC \] Where \( TR \) is total revenue, and \( TC \) is total cost. At the break-even point, there is no surplus or deficit in the business’s finances.
Step 2: Analyzing the Options:
- Option (A) TR>TC: This condition represents a situation where the business is making a profit because total revenue exceeds total cost. It does not describe the break-even point, which is when the two values are equal.
- Option (B) MR>MC: This represents a condition where marginal revenue (MR) exceeds marginal cost (MC), which typically signals that a business should increase output to maximize profit. This condition does not describe the break-even point.
- Option (C) TR = TC: This is the correct condition for the break-even point, where total revenue is exactly equal to total cost, resulting in zero profit.
- Option (D) Both (A) and (B): These conditions describe situations where the business is profitable, but they do not define the break-even point.
Step 3: Conclusion and Answer:
The correct answer is (C) because the break-even point occurs when total revenue equals total cost, meaning no profit or loss.