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WorksheetsRevenue and costs
Total questions: 15
Worksheet time: 8mins
A firm produces 1000 units and has a total cost of $50 000. The variable cost per unit produced is $40.
What is the total fixed cost of the firm?
$1000
$4000
$10 000
$40 000
Firms can grow by increasing the internal scale of their operations.
What might be a disadvantage of this to the firm?
A average cost begins to fall
it is difficult to motivate workers
labour is replaced by robots
markets become global
When is profit maximisation achieved?
A 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
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
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?
A $100 000
$150 000
$220 000
$370 000
What is the definition of diseconomies of scale?
the decrease in average revenue as output increases
the decrease in fixed cost as output increases
the increase in average total costs as output increases
the increase in total costs as output increases
What is an example of a technical economy of scale?
A Banks provide loans at a lower interest rate to bigger firms.
Bigger firms hire more workers.
Firms obtain discounts when buying in bulk.
Machines are used closer to their full capacity.
Which form of production would be least likely to have the advantages of economies of scale?
car manufacturing
commercial cereal farming
handmade jewellery
refining of oil products
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.
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.
What is a possible cause of diseconomies of scale?
an increase in extra administration
an increase in raw materials costs
an increase in taxation on company profits
an increase in the national minimum wage
A company’s annual report suggested that it had benefited from some changes.
Which change is an internal economy of scale for this company?
an improvement in road and rail facilities that has reduced its distribution costs
an increase in the number of local specialist workers that it could recruit
the introduction of new training at a local college for which staff have enrolled
the reduction in the company’s costs by the purchase of a factory supplying components
Which is an internal diseconomy of scale?
a lack of communication in a firm
a reduction of cost by buying in bulk
a shortage of skilled labour in an area
traffic congestion in a particular area
A major computer company announced that its profits had fallen below the level predicted.
What might have caused this?
increased advertising costs that greatly improved sales
low prices that made the company’s product competitive
new technology that reduced costs
reduced sales and low prices
An entrepreneur buys a workshop for $10 000 to make picture frames. In the first year he spent $40 000 on materials and employed two workers. He paid the workers for each frame produced with a total cost of $30 000. He bought a vehicle to deliver the frames for $10 000
What were his total variable costs?
$40 000
$70 000
$80 000
$100 000
