A company has cost and revenue functions given in dollars by and . What is the effect on the break even point of doubling the fixed costs?
A)The break even point is cut in half.
B)The break even point is doubled.

Question

A company has cost and revenue functions given in dollars by  and  . What is the effect on the break even point of doubling the fixed costs?
A)The break even point is cut in half. 
B)The break even point is doubled.

Quizplus · Accepted Answer

The break even point is the level of output at which the revenue earned is exactly equal to the total costs (both fixed and variable costs). Doubling the fixed costs would increase the total costs by a fixed amount, shifting the total cost curve upward. As a result, the break even point would increase, since it would require a higher level of output to earn enough revenue to cover the higher total costs. Therefore, the correct answer is B, the break even point is doubled.

A Company Has Cost and Revenue Functions Given in Dollars