Profit Profit is total revenue minus total cost. The break even point is, in the usual usage, the lowest output level at which total revenue exceeds total cost. That's because most new business fail by selling too little, not by selling too much. The break even point tells you the minimum you have to do to make your enterprise viable. We have already seen that the break even point for Joan's is 4, and that profitable output rates range from 4 to 8.
Profit is positive if and only if average cost is less than the price patients pay.
Thus, we can judge whether the firm breaks even either by looking at total revenue and total cost or by looking at price and average cost. We can apply this principle to show what happens to the break even point in a competitive industry if more and more firms enter the market and drive the price down. Enable Java on your computer to use this applet. Enable Java on your computer to use this applet. Enable Java on your computer to use this applet.