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Patrick Street Productions produces musicals - Edexcel - A-Level Economics A - Question 4 - 2021 - Paper 1
Question 4
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', assuming it is shown only five times, all at full capacity.
Answer
To calculate the total revenue from ticket sales, we first determine the number of shows and the total audience:
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The theatre has a capacity of 300 seats.
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Each ticket is priced at $40.
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If the show is performed 5 times, the total audience will be:
300 ext{ seats} imes 5 ext{ shows} = 1500 ext{ attendees}
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The total revenue from ticket sales is calculated as follows:
1500 ext{ attendees} 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.
Answer
Next, we calculate the necessary government subsidy to cover all costs:
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The total cost of production is $200,000.
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The revenue from ticket sales covers 30% of the total costs. Thus, we calculate:
0.30 imes 200,000 = 60,000 ext{ dollars}
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Charitable donations contribute 12.5% towards total costs:
0.125 imes 200,000 = 25,000 ext{ dollars}
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Therefore, the total funding from ticket sales and donations is:
60,000 + 25,000 = 85,000 ext{ dollars}
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Finally, the government subsidy required to cover all costs is:
200,000 - 85,000 = 115,000 ext{ dollars}
Thus, the value of the government subsidy necessary for this production is $115,000.