Livestock Economics, Marketing and Business Management

BREAK-EVEN POINT

• Break-Even Point is the quantity of output corresponding to minimum of average total cost.
• Exactly at this point, the producer neither gains nor looses anything.
• Whatever income he gets above this point is his profit.
• Suppose the farmer is operating below this point he will be incurring loss towards his fixed cost.
• In short-run, the farmer continues to operate even below this profit. e.g., broiler farms.
• In the long run, the producer has to operate above this point to remain in the business.

Shut-Down Point

• Shut-Down Point is the quantity of output corresponding to minimum point of average variable cost.
• Exactly at this point, the producer is in a position to meet the expenses towards the variable cost alone.
• If he operates below this point, he will not be in a position to meet even the variable expenses .
• In short run, the producer must be able to operate at least above this point in order to sustain in the business.

Long run

• Long run is a period of time during which the quantities of all factors, both variable and fixed, can be adjusted. Break Even Unit Cost Curve

Short run

• Short run is a period of time, within which the firm can vary its output by varying only the amount of variable factors such as labour and raw materials.
• Fixed factors such as capital, equipment, top management personnel cannot be varied.