A computer company produces affordable, easy-to-use home computer systems and has fixed costs of $250. The marginal cost of producing computers is $700 for the first computer, $250 for the second, $300 for the third, and $350 for the fourth, $400 for the fifth, $450 for the sixth, and $500 for the seventh.

Question

At what price is the zero-profit point?

I know that the zero-profit point formula is:
Price per unit x number of units = Fixed costs + (variable costs per unit x number of units)

Without the price per unit, how do I figure this out?

Answer 1

In this case, you can use the marginal cost of producing each computer to calculate the total variable cost. The total variable cost is the sum of the marginal costs for each computer. In this case, the total variable cost is $2,500.

Therefore, the zero-profit point is $2,750 ($250 fixed costs + $2,500 variable costs).