Economics 0455 · IGCSE · Firms’ costs, revenue and objectives
Firms’ costs, revenue and objectives — practice question
In 2014, worldwide steel demand weakened after China, the largest market for steel in the world, saw its consumption growth cut by half. The world’s largest steel-producing company predicted stronger profits for 2014, although it believed production might need to be reduced. The firm was deepening its specialisation in the steel market. Employment in this industry has fallen because firms have tried to lower capacity.
(a)[2]
Define ‘specialisation’ in this context.
(b)[4]
Explain how a fall in output affects average fixed cost and average total cost.
(c)[6]
Analyse how a firm could cut its output and raise its total profit.
(d)[8]
Discuss whether workers who lose their jobs are likely to still be out of work a year later.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Concentrating on a limited range of products or tasks” …