Total cost divided by the quantity of production

Classified in Economy

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2(a) (i) Shareholders

2(a) (ii) "Total costs increase"

 10,000 x 50HKD = 500,000 HKD

20,000 x 40HKD = 800,000 HKD

2(a) (iii) TR-TC = profit


2(b) (i) Economies of scale means that as output increases, cost per unit falls. So in table 2A we can observe how output increases from 10,000 to 20,000 and Average cost falls 50HKD to 40HKD.

2(b) (ii) Bulk buying can result in per unit costs of raw materials falling.

Division of labour which Involves employing Specialist employees to do specialist work. The production manager cannot do All of the work of the production department him or herself

2(b) (iii) lack of finance e.G. Banks may not loan money to small business so that They can’t expand.

2(b) (iv) the government should encourage new small Firms in the economy as it increases Employment as well as producing an economic growth. For example small firms Will employ workers thus reducing unemployment. If they grow larger then this Will further reduce unemployment. However if the government encourage new small firms in the economy they could have a low survival rate, as well As not having much opportunity cost. For example the government could spend the Money on large firms (MNC’s) or on other factors which will increase economic Growth. In conclusion small firms should be encouraged if government is sure They will survive but sometimes it may be better to encourage established Firms, especially in times of recession

2(c) (i) Externalities = Social costs – private cost

2(c) (ii) the benefits of tourism to the Seychelles outweigh the negative Externalities of tourism in pollution as well the loss of country’s Culture/identity. For example tourists may destroy the environment as well as the Reefs of the Seychelles. Nevertheless it increases exports as well as Employment. For example tourists can buy currency of the country and spend it In hotels. This is an invisible export. In conclusion the benefits can lead to Economic growth which can lead to higher standard of living. If the costs are Short-term then the problem is not great but if the externalities lead to the Destruction of the environment this might lead to less tourism.

2(c) (iii) e.G. The government can use fines and taxes to reduce the negative Externalities of tourism moreover the type of pollution it will reduce will be litter And airplane emissions.  As they use the Revenue to fund protection of the environment.

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