The table below shows the output, total cost and total revenue for a firm producing a component for the information technology (IT) industry. The selling price is £10 per unit of output sold. Use this table to answer the questions which follow. (Show your workings in your answer book.) Output (units) 0 100 200 300 400 Total Cost (£) 300 500 600 1,050 1,500 Total Revenue (£) 0 1,000 A B C (i) Calculate the total revenue received at each level of output above (A, B, and C). (ii) Calculate the profit earned when the firm sells 200 units. (iii) The total costs of the firm include fixed costs and variable costs. Explain each of the underlined terms and give one example of each for the above firm.

Leaving Cert Economics Cost of Production, Revenue & Profit: The table below shows the output

The table below shows the output, total cost and total revenue for a firm producing a component for the information technology (IT) industry - Leaving Cert Economics - Question b - 2018

Question b

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The table below shows the output, total cost and total revenue for a firm producing a component for the information technology (IT) industry. The selling price is £1... show full transcript

Worked Solution & Example Answer:The table below shows the output, total cost and total revenue for a firm producing a component for the information technology (IT) industry - Leaving Cert Economics - Question b - 2018

Step 1

Calculate the total revenue received at each level of output above (A, B, and C).

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Answer

To find the total revenue (TR) for each level of output, we use the formula:

$TR = ext{Output Units} imes ext{Selling Price}$

Given that the selling price is £10:

For 0 units: $TR = 0 imes 10 = £0$
For 100 units: $TR = 100 imes 10 = £1,000$
For 200 units: $TR = 200 imes 10 = £2,000$ (A)
For 300 units: $TR = 300 imes 10 = £3,000$ (B)
For 400 units: $TR = 400 imes 10 = £4,000$ (C)

Thus, A = £2,000, B = £3,000, C = £4,000.

Step 2

Calculate the profit earned when the firm sells 200 units.

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Answer

Profit is calculated using the formula:

$ext{Profit} = ext{Total Revenue} - ext{Total Cost}$

For 200 units:

Total Revenue (TR) = £2,000 (from part (i))
Total Cost (TC) = £600

Thus, $ext{Profit} = £2,000 - £600 = £1,400$ .

Step 3

The total costs of the firm include fixed costs and variable costs. Explain each of the underlined terms and give one example of each for the above firm.

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Answer

Fixed Costs: These are costs that do not change as output changes. They remain constant regardless of production levels. An example is the rent of the premises where the firm operates.
Variable Costs: These costs vary directly with the level of output. They increase as more units are produced. An example includes costs of raw materials for IT components.

The table below shows the output, total cost and total revenue for a firm producing a component for the information technology (IT) industry - Leaving Cert Economics - Question b - 2018

Worked Solution & Example Answer:The table below shows the output, total cost and total revenue for a firm producing a component for the information technology (IT) industry - Leaving Cert Economics - Question b - 2018

Calculate the total revenue received at each level of output above (A, B, and C).

Calculate the profit earned when the firm sells 200 units.

The total costs of the firm include fixed costs and variable costs. Explain each of the underlined terms and give one example of each for the above firm.

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