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Edexcel A-Level Economics A2 3.3.2 Revenue Costs and Profits Questions

Practise calculating and interpreting revenue, cost and profit data using tables, curves, elasticity links and economies of scale.

Syllabus
First assessment 2019
Course
Economics YEC11
Level
A2

Exam points

  • calculate TR, AR and MR from sales data and identify revenue maximisation where MR = 0
  • derive fixed, variable, average and marginal costs from total-cost and output tables
  • distinguish a fixed-cost rise from a variable-cost change by which of AC and MC shifts
  • explain rising MC after diminishing returns and separate it from LRAC scale effects
  • interpret falling or rising LRAC as economies or diseconomies and assess size-efficiency claims

Covered syllabus points

3.3.2.1a - Formulae to calculate and understand the relationship between: • total revenue •3.3.2.1b - Price elasticity of demand and its relationship to revenue concepts, including3.3.2.2a - Derivation of short-run cost curves from the assumption of diminishing marginal3.3.2.2b - law of diminishing returns3.3.2.2c - Formulae to calculate and understand the relationship between: • total cost • total3.3.2.2d - relationship between: • marginal product and marginal costs • average products and3.3.2.3a - relationship between long-run cost curves and diseconomies of economies/diseconomies of3.3.2.3b - Minimum efficient scale3.3.2.3c - Distinction between internal/external economies of scale3.3.2.3d - Sources of internal economies of scale: • financial • technical • managerial •3.3.2.3e - Sources of external economies of scale: • availability of skilled labour • access to3.3.2.3f - Sources of diseconomies of scale: • communication problems • coordination problems •3.3.2.4a - distinction between normal profit, supernormal profit and losses3.3.2.4b - Short-run and long-run shutdown points

Question 1

[Maximum number: 1]

The table shows the number of international subscribers for Netflix and its total revenue for Q4 in the years 2017 to 2020.

Table for Question 1 — Edexcel A-Level Economics A2

Which one of the following can be deduced from the table?

A

Average revenue was $32.62 in Q4 2017

B

Average revenue was $29.70 in Q4 2018

C

Average revenue was $32.72 in Q4 2019

D

Average revenue was $30.07 in Q4 2020

Question 2

[Maximum number: 1]

A monopoly is operating at its revenue maximising output. Which one of the following is true?

A

Marginal revenue is equal to marginal cost

B

Average revenue is equal to average cost

C

Average fixed costs are rising

D

Marginal revenue is zero

Question 3

[Maximum number: 1]

The diagram shows a short-run marginal cost curve for a small café in Thailand.

Figure for Question 3 — Edexcel A-Level Economics A2

Which one of the following is the reason why the MC curve slopes upwards from point X to point Y ?

A

Decreasing returns to scale

B

Increasing fixed costs

C

Diminishing returns

D

Diseconomies of scale

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