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Patrick Street Productions produces musicals - Edexcel - A-Level Economics A - Question 4 - 2021 - Paper 1

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Patrick Street Productions produces musicals. Its latest production is ‘It’s a Wonderful Life’ and the total cost of this production is $200,000. The ticket price is... show full transcript

Worked Solution & Example Answer:Patrick Street Productions produces musicals - Edexcel - A-Level Economics A - Question 4 - 2021 - Paper 1

Step 1

Calculate the total revenue from ticket sales for ‘It’s a Wonderful Life’

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Answer

To find the total revenue from ticket sales, we first calculate the total number of tickets sold:

  • The theatre has a capacity of 300 seats.
  • The production is shown 5 times.

Thus, the total number of tickets sold is:

300extseatsimes5extshows=1500exttickets300 ext{ seats} imes 5 ext{ shows} = 1500 ext{ tickets}

Next, we multiply the total number of tickets sold by the price of each ticket:

1500extticketsimes40extdollars/ticket=60,000extdollars1500 ext{ tickets} imes 40 ext{ dollars/ticket} = 60,000 ext{ dollars}

Therefore, the total revenue from ticket sales is $60,000.

Step 2

Calculate the value of the government subsidy necessary for this production to cover all of its costs

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Answer

To find the value of the government subsidy, we first need to calculate what proportion of the total costs of $200,000 will not be covered by ticket sales and charitable donations.

  • From the total costs of $200,000, ticket sales will cover 30%:

0.30imes200,000=60,000extdollars0.30 imes 200,000 = 60,000 ext{ dollars}

  • The remaining costs to be covered by donations and subsidies is:

200,000−60,000=140,000extdollars200,000 - 60,000 = 140,000 ext{ dollars}

  • Charitable donations contribute 12.5% of total costs:

0.125imes200,000=25,000extdollars0.125 imes 200,000 = 25,000 ext{ dollars}

Therefore, the amount still needed to cover all costs after ticket sales and donations is:

140,000−25,000=115,000extdollars140,000 - 25,000 = 115,000 ext{ dollars}

Thus, the value of the government subsidy required is $115,000.

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