VWO 4 Summary Markets

• Economie
• Middelbare school
• vwo
• Leerjaar 4

Turn-over AKA Revenue

The profit over one more item you produce.

Total profit

Break-even point

p*Q

MR - MC

Average profit * Q

TR - TC

The point where TC=TR

FloxVision

FloxVision sells the product Flox for €5. There are proportional variable costs of €2,50.

Production capacity is 80,000

Fixed costs are €1.25 per piece at capacity.

Draw: TR, TFC, TVC,TC, Total Profit

What is break-even quantity produced?

1. 40,000
2. 60,000
3. 80,000
4. 125,000

What is break-even turn-over AKA revenue?

1. 20,000
2. 40,000
3. 120,000
4. 200,000

When is profit maximum?

1. Q = 0
2. Q = 40,000
3. Q = 80,000
4. We cannot tell

At which price should FloxVision immediately stop producing?
And in the long-term?

1. If p <€2.50 and if p<€3.75
2. If p <€3.75 and if p<€3.75
3. If p <€2.50 and if p<€2.50
4. If p <€3.75 and if p<€2.50

Key points

Break-even point is point where profit is 0, so TR = TC.

Profit is maximum when MR = MC.

Total profit is TR - TC.

Shut-down happens when price is below average variable costs.

1. TC = 150,000 + 50Q
2. TC = 150,000 + 80Q
3. TC = 150,000 + 130 Q
4. TC = 150,000

1. TR = 50
2. TR = 80
3. TR = 50Q
4. TR = 80Q

1. TP = -90,000
2. TP = 90,000
3. TP = 180,000
4. TP = 640,000

1. 2,307.7
2. 1,875
3. 10,000
4. 12,307.7

Last Practice

Questions?

3.28 (alone and in silence)