Economics- 1.3.2a- Costs

Question 1

What is sales revenue and profit?

Answer 1

What is sales revenue and profit?

Question 2

What is variable and fixed cost?

Answer 2

Variable cost: the amount you bought the trees from the wholesaler for

fixed cost: the amount you paid out to rent the stall

Question 3

What is the sales volume formula (with examples) ?

Answer 3

Sales volume: Sales revenue / price

example: 100,000 / 40p = 250,000

Question 4

What is the sales revenue formula ( with examples) ?

Answer 4

Sales revenue: price x quantity

example: £5.50 x 40,000 = £220,000

Question 5

What are fixed costs?

Answer 5

Costs you have to pay no matter how much you sell.

they dont vary with output or sales

costs may rise in the long run due to inflation but have to be paid in the short run

Eg, rent, salaries, overheads etc

Question 6

What is the calculation for variable costs ( with examples) ?

Answer 6

Costs that vary with level of output or sales

eg costs of stock, fuel etc

Question 7

What are the 6 cost formulas?

Answer 7

Total fixed cost= Average fixed cost x quantity

Average fixed cost= total fixed cost / quantity

Total variable cost= average variable cost / quantity

average variable cost = total variable cost / quantity

total cost= total fixed cost + total variable cost

average cost= total cost / quantity

Question 8

What are some calculation examples of TVC?

Answer 8

£2.25 x 40,000 = £90,000

40p x 125,000 = £50,000

Question 9

What is marginal cost?

Answer 9

the cost added by producing additional unit of output

as you produce more, production changes for these goods aswell

in the long run, costs rise and fall depending on how much you produce