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The Table below shows the costs of production for a firm producing customised (made-to-order) furniture - Leaving Cert Economics - Question 3 - 2009
Question 3
The Table below shows the costs of production for a firm producing customised (made-to-order) furniture. Number of units of output | Units of Output | Fixed Cost |... show full transcript
Worked Solution & Example Answer:The Table below shows the costs of production for a firm producing customised (made-to-order) furniture - Leaving Cert Economics - Question 3 - 2009
Step 1
Using the partially completed table above calculate: the total cost of producing unit 3, unit 4 and unit 5.
Answer
To calculate the total costs for each unit:
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Unit 3:
- Fixed Cost = €300
- Variable Cost = €2,100
- Total Cost = Fixed Cost + Variable Cost = €300 + €2,100 = €2,400
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Unit 4:
- Fixed Cost = €300
- Variable Cost = €3,200
- Total Cost = Fixed Cost + Variable Cost = €300 + €3,200 = €3,500
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Unit 5:
- Fixed Cost = €300
- Variable Cost = €4,600
- Total Cost = Fixed Cost + Variable Cost = €300 + €4,600 = €4,900
Step 2
the marginal cost of producing unit 3, unit 4 and unit 5.
Answer
To find the marginal costs:
- Marginal Cost of Unit 3 = Total Cost of Unit 3 - Total Cost of Unit 2 = €2,400 - €1,700 = €700
- Marginal Cost of Unit 4 = Total Cost of Unit 4 - Total Cost of Unit 3 = €3,500 - €2,400 = €1,100
- Marginal Cost of Unit 5 = Total Cost of Unit 5 - Total Cost of Unit 4 = €4,900 - €3,500 = €1,400
Step 3
Step 4
Step 5
Outline two economic advantages of falling costs of production for the Irish economy.
Answer
- Increased Competitiveness: Lower production costs allow Irish businesses to offer products at more competitive prices, which can help increase exports.
- Increased Demand: With lower prices, consumers are more likely to purchase goods, leading to increased sales and potentially higher profits for firms.
Step 6
Suggest two ways the government could try to increase consumer demand.
Answer
- Decrease VAT: By reducing VAT rates, the government can lower product prices, encouraging consumers to spend more.
- Facilitate lending by financial institutions: Encouraging banks to provide more accessible credit could lead to higher consumer spending.
Step 7
Outline one possible economic advantage and one possible economic disadvantage of falling consumer demand for the Irish economy.
Answer
Economic Advantage:
- Firms may lower prices to stimulate sales, leading to more competitive pricing in the market.
Economic Disadvantage:
- Unemployment could increase as businesses might respond to falling sales by reducing their workforce.
Step 8
Step 9
Step 10
Outline two reasons why businesses may have concerns about an increase in the minimum wage.
Answer
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Increased costs: Higher wages can lead to increased operating costs for businesses, potentially resulting in higher product prices.
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Risk of reduced employment: Businesses may reduce their workforce or hours to manage increased labor costs, leading to potential layoffs.