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Instead of asking what entry is profitable, an easier question is what do I need to sell to break even? What is the best response to this question? O O O O a. Price is equal to the average fixed cost. b. Price is greater than the marginal cost. c. Price is less than the marginal cost. d. Price is equal to the marginal cost.

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Answer #1

Answer is (d).Price is equal to the marginal cost.

Break even point is a point where the firm just covers its cost.It is a no profit- no loss situation.When the price is equal to marginal cost the firm is able to cover all the costs.

If the price is less than marginal cost the firm will be covering only variable cost.It is a shut -down situation.

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