Which two lines on a cost curve diagram intersect at the zero-profit point?

Which two lines on a cost curve diagram intersect at the zero-profit point?

• A. The marginal cost curve and the marginal revenue curve
• B. The average cost curve and the marginal revenue curve
• C. The average total cost curve and the marginal cost curve
• D. The average variable cost curve and the fixed cost curve

Answer: (B)

Profit is zero when total revenue equals total cost, meaning price equals average total cost (P = ATC). In a market where price already equals marginal revenue (such as perfect competition), zero profit occurs at the point where the marginal revenue line crosses the average total cost curve. So the intersection of the marginal revenue line and the average total cost line marks zero profit. The other intersections don’t correspond to zero profit: the MR and MC intersection shows where profit is maximized, the MC crossing ATC is the minimum of ATC, and AVC with fixed cost isn’t theProfit-zero condition.

Profit is zero when total revenue equals total cost, meaning price equals average total cost (P = ATC). In a market where price already equals marginal revenue (such as perfect competition), zero profit occurs at the point where the marginal revenue line crosses the average total cost curve. So the intersection of the marginal revenue line and the average total cost line marks zero profit. The other intersections don’t correspond to zero profit: the MR and MC intersection shows where profit is maximized, the MC crossing ATC is the minimum of ATC, and AVC with fixed cost isn’t theProfit-zero condition.