Economics 0455 · IGCSE · Firms’ costs, revenue and objectives
Firms’ costs, revenue and objectives — practice question
In Nicaragua, GDP fell by 4% in 2019 even though household spending increased. Bananas, which are a merit good, were one Nicaraguan product whose supply rose. The Nicaraguan government encouraged banana farmers and other producers to raise output. Changes in output can influence a firm’s average production costs.
(a)[2]
Define supply in economics.
(b)[4]
Explain two methods a government could use to raise the consumption of merit goods.
(c)[6]
Analyse how the level and pattern of household spending may alter when GDP falls.
(d)[8]
Discuss whether or not a firm will gain from a rise in its output.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Being willing and able to sell” …