Break Even Point & Shut Down Point | Micro Economics | Ecoholics

Break-even point represents that volume of production where total costs equal to total sales revenue resulting into a no-profit no-loss situation.
If output of any product falls below that point there is loss; and if output exceeds that point there is profit.
A shutdown point is a level of operations at which a company experiences no benefit for continuing operations and therefore decides to shut down temporarily-or in some cases permanently. It results from the combination of output and price where the company earns just enough revenue to cover its total variable costs. The shutdown point denotes the exact moment when a company’s (marginal) revenue is equal to its variable (marginal) costs-in other words, it occurs when the marginal profit becomes negative.
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[@user-ci3oe6dj9y]

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[@user-ci3oe6dj9y]

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[@RichardJoel-hu8hk]

Wonderful explanation madm thanks so much

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[@debangshughosh834]

Mam in Break-even point and Shut down point diagram, why the MC curve is absent?

[@ECOHOLICS]

Hi Student, In the context of break-even point and shutdown point analysis, the marginal cost curve is typically assumed to be absent or undefined because these points are calculated based on the average total cost (ATC) curve and the average variable cost (AVC) curve. The break-even point is the level of output at which the total revenue equals total cost. At this point, the firm is neither making a profit nor incurring a loss. Mathematically, the break-even point occurs where the ATC curve intersects the demand curve. Since the ATC curve is the sum of the average fixed cost (AFC) and the AVC curve, and the AFC is constant and does not change with the level of output, we only need to consider the AVC curve and the demand curve to calculate the break-even point. Similarly, the shutdown point is the level of output at which the price falls below the minimum AVC and the firm incurs a loss that is greater than the total fixed cost. At this point, the firm should shut down production in the short run to minimize losses. Mathematically, the shutdown point occurs where the AVC curve intersects the demand curve. Again, we only need to consider the AVC curve and the demand curve to calculate the shutdown point. Therefore, in these analyses, the marginal cost curve is not required as it is not used to calculate the break-even point or shutdown point. However, the marginal cost curve is still an important concept in understanding the firm's production decisions in the long run Thank you for your appreciation, it would mean a lot to us if you could spend 2 minutes and give us a review here www.google.com/maps/place/Ecoholics/@12.9378327,77.6249581,17z/data=!3m1!4b1!4m5!3m4!1s0x397c434f623eb0fb:0xbad4719aba506f5f!8m2!3d12.9377689!4d77.627188

[@mpamyabigwigeeyoung118]

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[@kenedyvaiphei2975]

Thank you ma'am 👍

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[@shivanidabi7348]

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[@bs-gamingyt4819]

We have to divide both by Q and not multiply ur break even point that part is wrong Btw good explanation mam ❤

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