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What is Break-even point?

Break-even point: The sales level where profit equals zero.

Where Break-even point fits

Break-even point is part of Costs & Output in Economics. Costs shape output decisions: marginal cost is the cost of one more unit, scale lowers average cost, but diminishing returns raise it when you crowd a fixed resource.

Practical tip

Expand while the extra unit earns more than it costs.

Related terms

Marginal cost
Extra cost of producing one more unit.
Economies of scale
Average cost per unit falls as output grows.
Scalability
Ability to grow sales a lot without costs growing as fast.
Recession
A period when the economy shrinks and jobs and sales fall.
Diminishing returns
Each extra unit of input adds less output than the one before.
Economies of scope
Savings from producing several products together.
Average cost
Total cost divided by units produced.

Formulas you will use with it

Marginal costAverage total cost

Test yourself

Which term means: “The sales level where profit equals zero.”?

Economies of scope · Break-even point · Recession

Answer: Break-even point

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