AQA GCSE Economics: Business objectives, costs, revenue and profit (8136) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover section 3.1.4.1, The importance of cost, revenue and profit for producers, in the AQA specification for GCSE Economics (8136), first taught from September 2017. All firms, countries and figures are invented for practice. For explanations see the study guide and revision notes, the AQA GCSE Economics hub, the checklist and the free diagnostics.

Questions

1. A toy-car maker in Country B (illustrative) sells £208,000 of cars a year in a market worth £1.6 million. (a) State what is meant by market share. [1] (b) Calculate the firm’s market share. [2] (c) The firm wants a 16% share of an unchanged market. Calculate the extra sales it needs. [2]

2. A sandwich shop (illustrative) has these costs. State whether each is fixed or variable. [4]

• The shop’s monthly rent.
• Bread and fillings.
• The manager’s annual salary.
• Paper bags used for each order.

3. A phone-case printer (illustrative) has fixed costs of £1,200 a month and an average variable cost of £6. It makes 400 cases. (a) Calculate total variable cost. [1] (b) Calculate total cost. [1] (c) Calculate average cost. [1] (d) Each case sells for £11. Calculate the profit. [2]

4. A candle-wax recycler (illustrative) has total fixed costs of £800 at every output and sells at £20 a unit.

Output	TFC (£)	TVC (£)	Price (£)
100	800	1,500	20
200	800	2,600	20
300	800	4,000	20

(a) Calculate total cost and average cost at an output of 200. [2] (b) Calculate the profit or loss at each output. [3] (c) Identify which output earns the most. [1]

5. Explain two ways in which a firm may increase its profit. [4]

6. A market gardener in Region C (illustrative) has an average cost of £10 for a box of vegetables. The market price rises from £12 to £15 a box. (a) Calculate the profit per box before and after the rise. [2] (b) Explain how the price rise gives producers an incentive to expand production. [3]

7. A small theatre (illustrative) sells 180 tickets at £14 and 60 tickets at £10. (a) Calculate total revenue. [2] (b) Calculate average revenue per ticket. [2]

8. A bicycle-lamp firm’s sales rise from £250,000 to £285,000. (a) Calculate the percentage growth in sales. [2] (b) Explain why a firm might aim for sales growth even if profit per unit falls. [3]

9. A newly opened pastry firm must choose between maximising profit now and winning market share. Discuss which objective it should prioritise. [6]

10. A clothing firm in Country D (illustrative) sells 20,000 shirts at £16. Its average cost is £14. It saves money by letting dye waste run into a stream, which cuts average cost to £11.50. (a) Calculate the firm’s profit before and after the change. [3] (b) Explain one way in which the firm’s motive conflicts with ethical interests. [3] (c) Evaluate whether the firm should continue this practice. [6]

11. A juice-bar owner (illustrative) has fixed costs of £6,000 a month and an average variable cost of £2.50. The bar sells 4,000 drinks at £5. Two options are considered. Option A: a new supplier cuts average variable cost to £2.20. Option B: the price rises to £5.50 and sales fall to 3,600. (a) Calculate the current profit. [3] (b) Calculate the profit under option A. [2] (c) Calculate the profit under option B. [3] (d) Evaluate which option the owner should choose. [4]

Answers

1. (a) The firm’s share of total sales in its market [1]. (b) 208,000 / 1,600,000 [1] x 100 = 13% [1]. (c) Target sales = 0.16 x 1,600,000 = £256,000 [1]. Extra = 256,000 - 208,000 = £48,000 [1]. [5] Examiner insight: Put the firm’s sales over the whole market’s sales, in the same units, and show that division before the answer.

2. Rent: fixed [1]. Bread and fillings: variable [1]. Annual salary: fixed [1]. Paper bags: variable [1]. [4] Examiner insight: Test each item by asking whether the bill changes when more orders are made.

3. (a) 6 x 400 = £2,400 [1]. (b) 1,200 + 2,400 = £3,600 [1]. (c) 3,600 / 400 = £9 per case [1]. (d) TR = 11 x 400 = £4,400 [1]. Profit = 4,400 - 3,600 = £800 [1]. [5] Examiner insight: Show each stage of working, so a slip in one early figure does not hide the rest of your method.

4. (a) TC = 800 + 2,600 = £3,400 [1]. AC = 3,400 / 200 = £17 [1]. (b) At 100: TC 2,300, TR 2,000, profit -£300 (a loss) [1]. At 200: TR 4,000, profit 4,000 - 3,400 = £600 [1]. At 300: TC 4,800, TR 6,000, profit £1,200 [1]. (c) 300 units [1]. [6] Examiner insight: A negative profit is a loss, so keep the minus sign or write the word “loss”.

5. First way: reduce average costs, for example by buying materials from a cheaper supplier [1], so the same revenue leaves a larger gap above costs [1]. Second way: increase revenue, for example by advertising to sell more units [1], so total revenue rises by more than any extra cost [1]. [4] Examiner insight: Each way needs a method and a link to profit; naming “cut costs” and “raise revenue” alone is thin.

6. (a) Before: 12 - 10 = £2 [1]. After: 15 - 10 = £5 [1]. (b) A higher price widens the gap between price and average cost [1], so profit on each box rises [1]. Producers therefore want to supply more, and new firms may enter [1]. [5] Examiner insight: Link the price rise to profit per unit before you mention output, so the chain runs in order.

7. (a) 180 x 14 = 2,520 and 60 x 10 = 600 [1]. TR = £3,120 [1]. (b) Tickets sold = 240 [1]. AR = 3,120 / 240 = £13 [1]. [4] Examiner insight: Divide by all 240 tickets, not by the number of price categories.

8. (a) Change = 285,000 - 250,000 = 35,000 [1]. 35,000 / 250,000 x 100 = 14% [1]. (b) More sales may build brand awareness and customer loyalty [1]. Selling more units spreads fixed costs, which lowers average cost [1]. A larger firm may then earn more total profit later even with a smaller margin [1]. [5] Examiner insight: Divide the change by the starting figure; dividing by the new figure is a common slip.

9. For profit: profit now gives the firm cash to pay bills and invest [1]; a new firm with high fixed costs may fail if it makes losses for long [1]. For market share: lower prices and promotions attract first customers and build loyalty [1], and more sales spread fixed costs, lowering average cost [1]. Judgement: share is the better early aim if the firm can fund a short period of low profit, because loyal customers support later profit [1]; if the firm has little cash, it should seek enough profit to survive first [1]. [6] Examiner insight: A clear decision with a condition tends to be stronger than listing both objectives and stopping.

10. (a) Before: (16 - 14) x 20,000 = £40,000 [1]. After: (16 - 11.50) x 20,000 = £90,000 [1]. Increase £50,000 [1]. (b) The firm gains extra profit by not paying to dispose of waste safely [1]. Local people lose clean water and wildlife is harmed [1], so profit is put ahead of others’ interests [1]. (c) For continuing: profit rises by £50,000 and owners gain [1]. Against: fines, bad publicity and lost customers could outweigh the saving [1], and harm to residents is hard to justify [1]. Judgement: the firm should stop, as the short-term gain is likely to be smaller than long-term costs and the harm, unless laws are weak and customers do not mind [1]. Conclude with a stated condition [1], and refer to the figures [1]. [12] Examiner insight: Use the £50,000 in your evaluation and weigh it against a named cost; unsupported opinion about right and wrong earns little.

11. (a) TR = 5 x 4,000 = £20,000 [1]. TC = 6,000 + 2.50 x 4,000 = £16,000 [1]. Profit = £4,000 [1]. (b) TC = 6,000 + 2.20 x 4,000 = £14,800 [1]. Profit = 20,000 - 14,800 = £5,200 [1]. (c) TR = 5.50 x 3,600 = £19,800 [1]. TC = 6,000 + 2.50 x 3,600 = £15,000 [1]. Profit = £4,800 [1]. (d) Option A gives £5,200 and option B £4,800, so A earns £400 more [1]. Option B depends on customers accepting the higher price, and sales could fall further [1]. Option A depends on the new supplier keeping quality [1]. Judgement: choose A, as it gives higher profit and relies on one supplier’s quality, which can be checked [1]. [12] Examiner insight: Compare the final profit figures and give a reason that goes beyond the numbers.

Where marks are usually lost

• Using total variable cost as average cost, or leaving fixed costs out of total cost.
• Dividing revenue by the number of prices rather than the number of units.
• Dividing a change by the new figure when finding percentage growth.
• Dropping the minus sign on a loss.
• Saying a price rise always raises total profit.
• Describing an ethical issue without naming who is harmed.
• Evaluating with a list and no judgement.
• Missing units such as £ or “per unit”.

Next steps

• Revise with the revision notes and the study guide.
• Tick off topics on the printable checklist and see the course hub.
• Take our free 10-minute diagnostics.
• Book a free trial class: /trial/.

Official syllabus

AQA, GCSE Economics (8136) specification, for first teaching from September 2017: section 3.1.4.1, The importance of cost, revenue and profit for producers.