12 marks
Identify two variable costs of producing palm oil.
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Firms’ Costs, Revenue & Objectives (CIE IGCSE Economics)
Topic Questions
22 marks
Explain the effect that a rise in the price of flowers on Women’s Day in Russia would be likely to have on flower producers’ revenue.
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32 marks
In 2017, the Brazilian paper industry was booming. Its total revenue increased and it employed both more, and better quality, factors of production. Brazil’s largest paper producer merged with an Indonesian paper-producing firm at the end of 2017. The performance of Brazil’s coffee industry differed from its paper industry. Brazilian coffee experienced a fall in demand and a fall in total revenue.
Define total revenue.
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42 marks
Changes in the supply of enterprise result in the development of new firms. In 2016, a theme park in Hong Kong made a loss with visitor numbers falling by 9%. In 2017, the same public limited company opened another larger theme park in Shanghai. The new theme park is expected to benefit from both internal and external economies of scale.
Define a loss.
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52 marks
The mobile (cell) phone industry is growing in Asia with more workers being employed. In March 2017, there was a merger between two mobile phone producers, both of which had relatively high fixed costs. This merger created one of the largest mobile phone firms and moved the Asian market further from perfect competition and closer to monopoly. It was expected that profits in the industry would increase as a result of the merger.
Identify two fixed costs.
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62 marks
Identify, from the extract, two goals of business organisations.
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72 marks
Identify two fixed costs of production in Fig. 1.
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82 marks
In 2016, the world shortage of peanuts increased their price. China, which has traditionally been a net exporter of peanuts, was about to become a net importer. South Africa, which is an exporter of high-quality, high-cost peanuts used in chocolate confectionery, experienced the worst drought on record. A higher number of South African farmers applied for bank loans in the same year.
Explain the difference between the price of a product and the cost of a product?
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18 marks
There is a range of factors that influence the supply of economic goods, including natural disasters. Recently a series of earthquakes in one country destroyed buildings, including factories and offices. One factory that survived has since increased its scale of production. This firm has employed more factors of production and has experienced a fall in its average cost of production.
Discuss whether or not the average cost of production always falls when a firm increases its scale of production.
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28 marks
In 2016, Argentina’s annual inflation was 20%, down from 40% in 2015. Inflation had been high since 2003. Wages were constantly adjusted upwards. In addition, some employees demanded more non-wage benefits. Industrial action, often in the form of strikes called by trade unions, became more common in Argentina.
Discuss whether or not an increase in wages will reduce a firm’s profit.
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14 marks
More agricultural markets come close to perfect competition than markets for manufactured goods and for services. The goals of business organisations can vary between markets, and within markets. In 2017, the Nigerian government used supply-side policy measures to influence the goals and performance of firms in a range of markets and to lower firms’ average costs of production
Explain two goals a business organisation may have
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24 marks
A United Arab Emirates (UAE) airport announced a record profit of $1.9 billion in 2016. This was despite a fall in its total revenue. In 2016, the UAE considered introducing Value Added Tax (VAT). The introduction of an indirect tax may have an impact on unemployment. The UAE has a very low unemployment rate which is one reason why multinational companies (MNCs) set up in the UAE.
Explain how a firm may earn a profit despite a fall in revenue.
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34 marks
In England football stadiums are usually built and financed by the private sector, but in some countries the stadiums are built and financed by the government. Many football stadiums in the English Premier League are full on match days. In the short run the supply of seats is perfectly inelastic. The football clubs could actually raise prices, still sell their tickets and so raise their profits. Premier League footballers currently receive very high wages.
Explain two reasons why a firm may not aim to earn maximum profit.
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46 marks
The price elasticity of demand (PED) for sugar in most countries is less than 1. In 2017, the price of sugar fell. However, the price of specialised, higher quality sugar grown in countries such as Mauritius fell by less than the average global price. Efficient producers, such as some farmers in Brazil that have a low fixed cost of production, were also less affected by the fall in price
Analyse the possible reasons why a producer’s fixed cost may increase
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