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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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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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
$370 000
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What must result from an increase in output?
a decrease in the average cost
a decrease in the total costs
an increase in the fixed costs
an increase in the variable costs
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The diagrams show the average total cost (ATC) curves of four firms and how they change as output increases.
Which firm has the highest fixed costs?
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Which statement about total fixed cost is correct?
It falls as output increases.
It is calculated by adding total cost and total variable cost.
It is calculated by dividing total cost by output.
It must be paid even if output is zero.
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Which statement about fixed costs is correct?
They exist only in the long run.
They include raw material and direct labour costs.
They increase at the same rate as output.
They must be paid even if there is no output.
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The table shows the output and total costs of a small firm.
| output (units) |
total costs ($) |
|
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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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
$80
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A firm producing bicycles has the following costs at different levels of output.
| output | total fixed costs ($) | 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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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 ($) |
|
|
A B C D |
10 2000 20000 20000 |
10 200 10 200 |
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The table shows the total cost of firm X at each level of output.
| output | total cost |
|
0 1 2 3 |
3 5 6 9 |
At which level of output does total variable cost exceed total fixed cost?
0
1
2
3
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The table shows a firm’s average revenue and average cost at different levels of output.
When all output is sold, which level of output gives maximum profit?
| output (units) |
average revenue (US$) |
average cost (US$) |
|
|
A B C D |
5 10 15 20 |
10 20 25 30 |
30 20 15 18 |
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The table shows a firm’s total revenue and total cost at different levels of output.
Which level of output gives maximum profit?
| output (units) |
total revenue ($) |
total cost ($) |
|
|
A B C D |
10 20 30 40 |
15 20 25 30 |
15 18 20 21 |
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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
$2000
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The table shows the costs of a firm.
| units of output |
variable costs ($) |
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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The diagram shows the fixed costs, variable costs and total costs of a firm.
Which distance represents the firm’s fixed costs?
WX
WY
XY
XZ
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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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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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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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