SOLUTION:
1) Cost function: C(x) = F + Vx; where F = Fixed cost; V = Variable cost Per unit; x= No of units produced and sold; C = Total cost
Revenue function: R(x) = px; where R(x) reflects the revenue from selling
Suppose we have Fixed cost = 200,000; Variable cost: $10; Selling price $50 each unit
Thus Cost function: C(x) = F + Vx = 200,000 + $10x
Revenue function: R(x) = px = $50x
2) Profit Functions: P(x) = R(x) = C(x)
Profit Functions: $50x - 200,000 - $10x = $40x - 200,000
3) Graph enclosed
4) From break-even point we can determine when the firm starts earning profits. Once the company surpass the break-even price, it can start making a profit. It is clearly indicated in the graph
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