Economics 2281 · O Level · Firms' costs, revenue and objectives
Firms' costs, revenue and objectives — practice question
In China, demand for luxury goods, such as costly perfume, rose sharply from 2007 to 2012. The mean revenue earned from selling these goods also increased. Many luxury goods have elastic demand. At present, a high share of the luxury goods sold in China is imported. Some firms are now thinking about making products in China instead of exporting to China.
(a)[2]
Define ‘average revenue’ in words.
(b)[4]
Explain two reasons why demand for luxury products is often elastic.
(c)[6]
Analyse how a perfume producer could make the supply of its products more responsive to price changes.
(d)[8]
Discuss whether a firm would earn more profit by producing in a foreign market instead of exporting to that market.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Total revenue ÷” …