The break-even point can be defined as the production and sales levels of a given product at which the revenue generated from the sales is perfectly equal to the production cost.

At this point, the company does not make any profit or loss; that is, it breaks even. The shut-down point refers to the minimum price where companies prefer shutting down their operation instead of continuing to operate. In other words, it is the minimum price and quantity for keeping operations open. Break-even price P2 Shut-down price P1 MC £ AVC 9₁ 9₂ ATC As seen previously, the break-even point is the point where the marginal cost (MC) equals the average total cost (ATC). The shut-down point of production, on the other hand, is the price at which the marginal cost does not even cover the average variable cost (ATC). At this point, the company is better off stopping its production than keeping producing at a loss. Suppose the hospital operates in a perfectly competitive market. The market price of this product is $40. Assume that a manufacturing company Total Cost (TC) function is TC = 20Q6Q+Q" What is the minimum market price for which you will choose to produce?