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Identify break-even point from the following diagram : |
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Answer» Solution :Break-even point REFERS to the SITUATION in which a firm is able to RECOVER all its costs. In other words it is a situation of normal profits ( A situation of No Profit - No Loss ). In the above figure point 'E' refers to Break-even point. If a firm operates to the left of point 'E' it is enjoying super-normal profits (TR gt TC). (Also break-even point can be determined from equality between AR and AC. Refer to section 8.3 SPECIFIC analysis : (1) Normal profits) |
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