Economics 0455 · IGCSE · Firms’ costs, revenue and objectives
Firms’ costs, revenue and objectives — practice question
China is the world’s biggest producer of gold, while India is the world’s biggest buyer of gold. Gold mining in China is becoming more capital-intensive, which is lowering how price inelastic the supply of gold is. Workers’ wages in the industry are rising, although other production costs are falling.
(a)[2]
What does it mean when an industry is described as ‘capital-intensive’?
(b)[4]
Explain two reasons why the supply of a product may be price inelastic.
(c)[6]
Analyse the impact that an increase in output will have on fixed, variable and average costs.
(d)[8]
Discuss whether higher wages paid by an industry will encourage more people to work in that industry.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “The industry makes use of a high level of capital/machinery relative to labour” …