9B : revenue, cost , and profit

Question 1

what is the main way that businesses earn an income ?

Answer 1

by selling goods and services to create

REVENEU : is the amount of money that a company receives from selling its products

can you be referred as TOTAL REVENUE

Question 2

define costs

Answer 2

costs are the expenses incurred to produce goods or services.

Question 3

how do firms costs change in the short run ?

Answer 3

short run : often one factor is FIXED

e.g. to expand production you can employ more workers and buy more raw martial.
(in this case factor = capital)
however you only have a fixed amount of space which limits the number of machines you can purchase

Question 4

how do firms costs change in the long run ?

Answer 4

all factors of production can be adjusted. non are fixed.

example : you can buy another factory , buy more machines. this will increase your capacity

Question 5

what are the types of costs ?

Answer 5

• fixed costs :
  cost that do not change with output e.g. rent , insurance. these costs are the same if the company produces a million products or no products at all
• semi-variable costs : costs which would normally be fixed e.g. full time workers wages but sometimes change e.g. if they worked over time
• variable costs : costs which change with output e.g. raw materials , fuel

(the greater the amount of products the company wants to make the mor it will cost)

Question 6

how can you calculate total revenue ?

Answer 6

total revenue = quantity sold x price

example : a company sells 300 000 dolls at £5 each

total revenue = 300 000 x £5 = £1 500 000

Question 7

how to find variable costs ?

Answer 7

variable costs x quantity produced
= variable costs

Question 8

how can you find the total costs ?

Answer 8

fixed costs + variable costs = total costs

Question 9

how do you find profit ?

Answer 9

• profit is the difference between revenue and costs

profit =total revenue - total costs

( - if answer = negative that it is a loss )

Question 10

define direct costs

Answer 10

costs identified with a particular product
e.g. raw materials , packaging , direct labor
( all of these can be identified/noticed when looked at a product )

Question 11

define indirect costs

Answer 11

also known as overheads. results from a business (usually fixed costs)
e.g. rent , insurance , salaries