Determining the Number of Units That Must Be Produced in Order

question 60

True/False

Determining the number of units that must be produced in order to generate enough profit to cover total fixed costs is one reason for using a break-even analysis.

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Definitions:

Economic Profit

The surplus remaining after total costs are subtracted from total revenue, considering both explicit and implicit costs.

Zero Profit

A situation where a firm's total revenues are exactly equal to its total costs, leading to no net gain or loss.

Breaking Even

The situation in which a firm is earning exactly a normal rate of return.

Economic Profit

This refers to the surplus remaining after subtracting both visible and hidden costs from total revenues, highlighting a firm's genuine financial gain.