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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’
Answer
To find the total revenue from ticket sales, we first need to determine the total number of tickets sold:
- Total Seats in Theatre: 300 seats
- Number of Shows: 5 shows
Therefore, the total tickets sold is:
Next, we calculate the total revenue from these ticket sales:
- Ticket Price: $40
Thus, the total revenue from ticket sales will be:
The total revenue from ticket sales for ‘It’s a Wonderful Life’ is $60,000.
Step 2
Calculate the value of the government subsidy necessary for this production to cover all of its costs
Answer
To find the government subsidy required, we start from the total cost and work backward:
- Total Cost of Production: $200,000
- Revenue Contribution from Ticket Sales: We calculated this in part (a) as $60,000.
The proportion of total costs covered by ticket sales is 30%, therefore:
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Charitable Donations Contribution: 12.5% of total costs:
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Total Contribution from Ticket Sales and Donations:
- Total Contribution:
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Calculate the Remaining Amount Needed:
- Remaining Cost to be Covered by Government Subsidy:
Hence, the value of the government subsidy necessary for this production to cover all of its costs is $115,000.