Firms’ Costs, Revenue & Objectives (Cambridge (CIE) IGCSE Economics)

Exam Questions

1 hour34 questions
11 mark

When is profit maximisation achieved?

  • when average fixed cost is at a minimum

  • when average revenue is at a maximum

  • when the firm produces the largest output it can with the resources it has available

  • when there is the greatest possible difference between total revenue and total cost

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21 mark

When will a firm maximise its profits?

  • when it excludes a rival supplier from the market

  • when it produces where average cost and average revenue are equal

  • when it sells as many products in as many different markets as it can

  • when the difference between total cost and total revenue is greatest

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31 mark

An entrepreneur buys a workshop for $200 000 to make plastic boxes. In the first year of operation he spends $70 000 on materials, employs ten production workers paid by the amount produced (piece rate) at a total cost of $80 000 and buys two delivery vehicles for $10 000 each.

What are his total variable costs?

  • $100 000

  • $150 000

  • $220 000

  • $370 000

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41 mark

What must result from an increase in output?

  • a decrease in the average cost

  • a decrease in the total costs

  • an increase in the fixed costs

  • an increase in the variable costs

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51 mark

The diagrams show the average total cost (ATC) curves of four firms and how they change as output increases.

Which firm has the highest fixed costs?

  • qp-414644-2020-specimen-paper-1-q13a
  • qp-414644-2020-specimen-paper-1-q13b
  • qp-414644-2020-specimen-paper-1-q13c
  • qp-414644-2020-specimen-paper-1-q13d

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61 mark

Which statement about total fixed cost is correct?

  • It falls as output increases.

  • It is calculated by adding total cost and total variable cost.

  • It is calculated by dividing total cost by output.

  • It must be paid even if output is zero.

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71 mark

Which statement about fixed costs is correct?

  • They exist only in the long run.

  • They include raw material and direct labour costs.

  • They increase at the same rate as output.

  • They must be paid even if there is no output.

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11 mark

The table shows a firm’s total revenue and total cost at different levels of output.

Which level of output gives maximum profit?

 

output (units)

total revenue ($)

total cost ($)

A

B

C

D

10

20

30

40

15

20

25

30

15

18

20

21

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    21 mark

    A firm has fixed costs of $1000. The table shows the variable cost at different levels of output.

    output (units)

    1

    2

    3

    4

    variable cost ($)

    100

    190

    270

    350

    If the goods are sold for $500 each, how much profit will be made from the sale of 4 units?

    • $650

    • $1000

    • $1650

    • $2000

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    31 mark

    The table shows the costs of a firm.

    units of output

    variable costs ($)

    total costs ($)

    10

    20

    30

    40

    20

    50

    80

    110

    80

    110

    140

    170

    What is the value of the firm’s fixed costs?

    • $20

    • $30

    • $60

    • $80

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    41 mark

    The diagram shows the fixed costs, variable costs and total costs of a firm.

    qp-june-2019v2-paper-1-cie-economics-igcse-q14

     

    Which distance represents the firm’s fixed costs?

    • WX

    • WY

    • XY

    • XZ

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    51 mark

    In the short run, a firm calculates its total fixed cost, total variable cost and total cost. It then plots a graph showing how they change as output increases.

    What happens to the lines showing the total variable cost and total cost as output increases?

    • They merge to become one curve.

    • They move closer together.

    • They move further apart.

    • They remain a constant distance apart.

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    61 mark

    Why is the energy supply industry dominated by very large firms in many economies?

    • Government controls prevent the exploitation of consumers.

    • High fixed capital costs exist.

    • Labour-intensive production techniques are used.

    • Non-price advertising increases competition.

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    71 mark

    A firm that sells its product for $6 a unit has the following total costs.

    output (units)

    0

    10

    20

    30

    total costs ($)

    40

    100

    120

    150

    Which statement is correct?

    • Average cost is lowest when 10 units are produced.

    • The firm does not make any profit when 20 units are sold.

    • The firm has no fixed costs.

    • Total variable costs fall continuously over these outputs.

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    11 mark

    The table shows the output and total costs of a small firm.

    output (units)

    total costs ($)

    0

    1000

    5000

    10000

    50000

    100000

    400000

    600000

    What is the average fixed cost of producing 10 000 units?

    • $5

    • $6

    • $55

    • $60

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    21 mark

    The table shows the costs of a firm.

    variable cost per good

    fixed cost

    $2

    $40

    What is the average total cost if the firm produces 20 goods?

    • $1

    • $2

    • $4

    • $80

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    31 mark

    A firm producing bicycles has the following costs at different levels of output.

    output

    total fixed costs ($)

    total variable costs ($)

    10
    20
    30

    300
    300
    300

    800
    1500
    3300

    What happens to the average total cost over this range of output?

    • It falls continuously.

    • It falls then rises.

    • It rises continuously.

    • It rises then falls.

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    41 mark

    A firm’s average revenue is $10. It sells 2000 units.

    What is the firm’s total revenue and the price of the product?

     

    total revenue ($)

    price ($)

    A

    B

    C

    D

    10

    2000

    20000

    20000

    10

    200

    10

    200

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      51 mark

      The table shows the total cost of firm X at each level of output.

      output

      total cost

      0

      1

      2

      3

      3

      5

      6

      9

      At which level of output does total variable cost exceed total fixed cost?

      • 0

      • 1

      • 2

      • 3

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      61 mark

      The table shows a firm’s average revenue and average cost at different levels of output.

      When all output is sold, which level of output gives maximum profit?

       

      output (units)

      average revenue (US$)

      average cost (US$)

      A

      B

      C

      D

      5

      10

      15

      20

      10

      20

      25

      30

      30

      20

      15

      18

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