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

To find the government subsidy required, follow these steps:

1. Establish the percentage of costs covered by ticket sales and donations: Ticket sales cover 30% of total costs, and charitable donations contribute 12.5%. Therefore, the total percentage covered by these sources is:

   $$\text{Total coverage} = 30\% + 12.5\% = 42.5\%$$

2. Calculate the percentage not covered: If 42.5% is covered, then the remainder that needs to be subsidized is:

   $$\text{Uncovered percentage} = 100\% - 42.5\% = 57.5\%$$

3. Determine the value of the government subsidy: Given that total costs are $200,000, the government subsidy required will be:

   $$\text{Subsidy} = 57.5\% \times 200,000 = 115,000 \text{ dollars}$$

Thus, the government subsidy necessary for this production to cover all its costs is $115,000.