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Suppose a firm has an average total cost function given by: ATC 9610/q +1 +10q Calculate the price where the firm breaks even (i.e. profit $0). (Do not include a $ sign in your response. Round to the nearest two decimal places if necessary.) Answer

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Answer #1

At break even point : Price is equal to minimum of ATC.

ATC = 9610/q + 1 + 10q

Now, take the derivative of ATC w.r.t q and equate it to 0, to find the minimum of ATC at which level of q , we get:

-9610/q2 +10 =0

q2= 9610/10

q2 = 961

q = 31 units

So, at break even point , P=ATC

P= 9610/31 + 1 + 10(31)

P= 310 + 1+ 310

P = 621 (at this price firm break evens).

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