Question 3.14: The total revenue and total cost functions are given as foll......
The total revenue and total cost functions are given as follows:
TR = 3Q (3.23)
TC = 10 + 2Q (3.24)
(a) Calculate the equilibrium quantity algebraically and graphically at the break-even point.
(b) Calculate the value of total revenue and total cost at the break-even point.
(a) The break-even point is algebraically solved by equating total revenue, equation (3.23), and total cost, equation (3.24):
3Q = 10 + 2Q
Q = 10
The equilibrium quantity at the break-even point is Q = 10. This is illustrated in Figure 3.10.
(b) The value of total revenue and total cost at the break-even point is calculated by substituting Q = 10 into the respective revenue and cost functions:
TR = 3Q = 3(10) = 30
TC = 10 + 2Q = 10 + 2(10) = 30
At Q = 10, TR = TC = 30.
