Business Costs, Revenues & Profit (Edexcel IGCSE Economics): Exam Questions

Figure 3 shows the daily costs of hiring a vehicle to transport goods to a customer.

Figure 3

Calculate the daily total costs of transporting the goods to the customer. You are advised to show your working.

MAS Supermarkets is the largest supermarket chain in Cyprus. It owns many shops across the country, selling a wide range of groceries. The firm states that its focus is on selling quality products, offering good service and low prices.

With reference to the data above and your knowledge of economics, analyse how internal economies of scale may lead to benefits for MAS Supermarkets.

Total revenue can be defined as the quantity of goods sold

Figure 3 shows the costs to a firm of running a machine to produce an order of goods.

Figure 3

Calculate the total variable costs of this order for the firm. You are advised to show your working.

A project to update the infrastructure and develop new routes along Indian railways has been in progress for a number of years. One part of the plan is to expand the rail network between Hyderabad and Karnataka.

The expanded railway network will provide more services for passengers, along with more freight trains. This will mean more raw materials, including cement, iron ore and steel can be transported.

With reference to the data above and your knowledge of economics, analyse the impact of external economies of scale on construction firms in India.

Figure 3 shows some of the production costs in the month of September for a firm manufacturing rugby souvenirs in France, in preparation for the 2025 Six Nations tournament.

Figure 3

Calculate the total variable costs for the firm in the month of September. You are advised to show your working.

What is meant by the term total revenue?

Twitter, one of the most popular social media platforms, was bought for $44bn by entrepreneur Elon Musk in 2022.

The aims of Elon Musk include the creation of an ‘everything app’ – a platform that includes messaging, payments, ridesharing, food delivery and more. To support this, Elon Musk introduced major changes to Twitter, including renaming it ‘X’.

The number of X users increased to a new high of 530 million by 2023, following an increase in publicity about the change of name. This meant X did not need to pay high advertising costs to promote the platform.

Advanced technology will be introduced by X to enable users to operate multiple functions on the new platform. This research and development is likely to lead to a significant cost for the firm.

The platform has experienced a decrease of 65% in advertising revenue. Thousands of workers have already lost their jobs, including those in managerial roles.

With reference to the data above and your knowledge of economics, evaluate whether X is likely to benefit from economies of scale.

A firm has total fixed costs of $57000 per month and variable costs of $750 per unit. It produces 1,820 units per month.

Calculate the total costs per month for the firm. You are advised to show your working.

Hong Kong telecommunications firm, CK Hutch, is planning to merge with Indosat which is based in Jakarta, Indonesia. Indosat provides services for mobile phones and broadband. It is a growing business, with a value of $2.2bn and more than 60 million customers. Indonesia is Southeast Asia’s most populated country.

(Source adapted from: Link (opens in a new tab))

With reference to the data above and your knowledge of economics, assess the extent to which a merger between CK Hutch and Indosat is likely to lead to economies of scale.

A firm has total costs of $700. It sells 300 items at a price of $20 each. What is the profit for the firm?

State one type of an external economy of scale.

Figure 4 shows the monthly costs per unit when a firm makes 3,000 units.

Figure 4

Calculate the average cost per unit (AC) for the firm when it makes 3,000 units. You are advised to show your working.

What is meant by the term economies of scale?

Figure 3 shows some of the production costs in March for a firm manufacturing clothing in Bangladesh.

Figure 3

Calculate the total fixed costs for the firm in March. You are advised to show your working.

On the diagram below, draw and label economies of scale, diseconomies of scale and the point at which the firm is most efficient.

Figure 5 shows profit for a firm between 2020 and 2022.

Figure 5

Calculate, to two decimal places, the percentage change in profit for the firm between 2020 and 2022. You are advised to show your working.

A firm charges a price of $160 per item and has average costs of $120 per item. It sells 20000 items.

What is the total revenue for the firm?

Which one of the following is a situation when firms in a growing industry all benefit from lower average costs?

A firm has total fixed costs of $75000 per month and variable costs of $525 per unit. It produces 1350 units per month.

Calculate the total costs per month for the firm. You are advised to show your working.

A firm sells 40 units of a good. Variable costs are $4 per unit. Customers pay $10 per unit.

Which one of the following equals $400?

Unilever is a multinational corporation that sells consumer goods. It currently uses 700,000 tonnes o f non-recyclable plastic packaging each year. By 2025, it plans to reduce overall usage by 100,000 tonnes and replace the remaining 600,000 tonnes with more expensive plastic, which can be recycled.

(Source adapted from: Link (opens in a new tab))

With reference to the data above and your knowledge of economics, analyse how the profits of Unilever may be affected.

Figure 2 shows some of the monthly production costs for a firm which manufactures clothing.

Figure 2

Calculate the total variable costs for the firm each month. You are advised to show your working.

Instagram, WhatsApp and Facebook Messenger are social network messaging services, taken over and owned by Facebook. Between them, they have more than 2.6 billion users. Although they currently operate as stand-alone apps, Facebook’s chief executive, Mark Zuckerberg, has now taken greater control of all three. He has plans to combine the services, allowing messages to be sent between the different apps.

Both Instagram and WhatsApp have grown considerably since the takeover but their original founders have left due to the increased control from Facebook. Some employees are unhappy and do not understand the planned changes to the services. However, Zuckerberg thinks there will be long-term benefits including reduced costs. He says that less software will be needed once the system is in place and consumers will be less likely to use competitors’ apps.

(Source adapted from: Link (opens in a new tab))

With reference to the data above and your knowledge of economics, evaluate whether Zuckerberg’s decision to combine all three services is likely to lead to economies of scale.

Which one of the following is the formula for calculating average cost?

Figure 2 shows selected financial data of a firm selling shoes.

Figure 2

Calculate the profit or loss for the firm for each pair of shoes. You are advised to show your working.

A firm has total fixed costs of $50000 per month and variable costs of $250 per unit. It produces 750 units per month.

Calculate the total costs per month for the firm. You are advised to show your working.

Cutting Edge is a gardening firm that started trading three years ago. It often turned down work because it did not have a saw powerful enough to cut through larger trees. Once the firm expanded, Cutting Edge was able to justify buying a bigger saw.

With reference to the data above and your knowledge of economics, analyse how Cutting Edge benefitted from technical economies of scale.

Figure 4 shows profit for a firm between 2017 and 2019.

Figure 4

Calculate, to two decimal places, the percentage change in profit between 2017 and 2019, for the firm. You are advised to show your working.

A firm has total costs of $1 250 000 per month and variable costs of $100 per unit.

If it produces 5,000 units, calculate the total fixed costs per month for the firm.

State the formula for profit.

Which one of the following is an example of an external economy of scale?

Veronique owns a shop that makes cakes for special occasions. The cakes sell for an average price of €40 each.

Calculate the quantity of cakes sold by Veronique’s shop when total revenue is €3 600. You are advised to show your working.

A firm has total costs of $500 and sells each item at a price of $50. It sells 100 items. What is the profit or loss for the firm?

Average costs can be calculated by which one of the following equations?

Sky Team is a group of 19 airlines, including Delta Airlines, KLM, Air France and China Airlines that share operating facilities and cooperate when setting flight routes. This allows more choice for passengers. Vietnam Airlines is a small airline that became a member of Sky Team in 2010. It was the first Southeast Asian airline to join Sky Team and has become more well-known to air passengers as a result of the group’s advertising campaigns.

With reference to the data above and your knowledge of economics, analyse how a smaller airline may benefit from internal economies of scale by joining a group such as Sky Team.

The music entertainment industry is dominated by a few main firms. These are BMG, EMI Group, Sony, Universal Music Group and Warner.

Explain one possible barrier to entry a new firm might face when trying to enter this industry.

Figure 4 shows some of the production costs in the month of May for a firm manufacturing football souvenirs in Qatar, in preparation for the 2022 World Cup.

Figure 4

Calculate the total variable costs for the firm in the month of May. You are advised to show your working.

Istanbul’s new airport will be huge in size and capacity when construction is finished. It will have the ability to handle around 200 million passengers annually. This is double the number of the world’s current busiest airport in Atlanta, USA. The airport will cost $11.7bn to build. It will have four terminals, six runways and cover an area of 29.5 square miles, making it larger than the island of Manhattan in New York.

(Source adapted from: https://matadornetwork.com/read/istanbul-new-airport-biggest-world/ (opens in a new tab))

With reference to the data above and your knowledge of economics, assess whether Istanbul’s new airport is likely to benefit from internal economies of scale.

What is meant by the term total revenue?

Which one of the following is the correct label to replace ‘X’ on the diagram below?

Figure 4 shows some of the production costs in November for a firm manufacturing rugs and carpets in Pakistan.

Figure 4

Calculate the total fixed costs for the firm in November. You are advised to show your working.

Five years ago Ben Hogan began working for a large firm based in London. He was originally happy with his role but is now thinking about leaving. He is frustrated with how long it takes for even straight-forward decisions to be made.

The firm has grown considerably in the last two years and there are many more employees as a result. There is an increasing number of checklists about how to carry out tasks. Ben finds this time‐consuming and feels his ideas are no longer listened to.

With reference to the data above and your knowledge of economics, analyse why Ben’s employer might be experiencing diseconomies of scale.

A firm has total fixed costs of $40 000 per month and variable costs of $150 per unit. If it produces 1,000 units, what are the total costs per month for the firm?

Figure 1 shows the costs of production per month for a firm making 2,000 units.

Figure 1

Calculate the average cost per unit for the firm when it makes 2,000 units. You are advised to show your working.

Which one of the following is a diseconomy of scale?

A firm has monthly total costs of $150 000 and monthly fixed costs of $90 000. If it produces 1,000 units, what are the monthly total variable costs for the firm?

The total revenue of a printing firm is $75 000 per month when it sells 100,000 newspapers. The price of a newspaper increases to $0.85 and demand falls to 95,000 newspapers per month.

Calculate the new total revenue. You are advised to show your working.