Economics 2281 · O Level · Firms' costs, revenue and objectives
Firms' costs, revenue and objectives — practice question
In 2019, Nicaragua saw GDP fall by 4%, even though household spending increased. Bananas were one Nicaraguan product whose supply rose; bananas are a merit good. The Nicaraguan government urged banana growers and its other producers to raise output. When output rises, a firm’s average production costs can change.
(a)[2]
State the meaning of supply.
(b)[4]
Explain two measures a government could use to increase the consumption of merit goods.
(c)[6]
Analyse how household spending may alter in both level and pattern when GDP falls.
(d)[8]
Discuss whether or not a firm would gain from an increase in 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 to sell a product” …