Total cost divided by the quantity of production

Classified in Economy

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2(a)(i) Total costs = €1300

No. Of Kilos = 130

Average cost per kilo = €1300/130 = €10

2(a)(ii) Total Revenue (TR)= 130 x €30 = €3900

Total cost (TC) = €1300

Profit (TP Or P)= €3900 -€1300 = €2600

2(a)(iii) B Variable costs

2(a)(iv): Variable costs change as production changes so More sugar needed as more sweets produced.

2(a)(v) Fixed costs = rent + insurance = €500 + €50 = €550

2(a)(vi)  Variable costs vary with output so when output Is zero no variable costs are incurred..

2(a)(vii) Lack of finance is the most important limitation To the growth of the firm as there is an inability to finance expansion in Scale of output as well as an inability to grow market share or expand into Other markets. However there are other limitations to the growth of the firm Such as a lack of demand (local market) or an availability of other factors of Production. In conclusion even if finance is available and affordable other Factors may prevent or not justify growth.

2(b)(i) C As output increases long run average costs Fall

2(b)(ii) Supermarkets have such high market share in The scale of confectionery because they can buy in bulk therefore they sell Sweets more cheaply than small firms. Moreover they employ specialists who can Determine the best place to place the sweets in order to maximize sales.

2(b)(iii). Advertising and quality of goods

2(b)(iv) Oligopolies always limit consumer choice as There are only a few large firms in the industry due to this consumers choice Is limited. In addition sometimes oligopolies produce identical goods or Services for example petrol, so there is no substitute this produces a Limitation in choice. On the other hand most oligopolies may increase choice if They focus on non-price competition as product differentiation, furthermore They can have similar products but there is a range of features and brands like For instance the additives which they use in petrol to keep the engine clean make It more economical. In conclusion choice will be limited as the number of Producers is small but they can act in different ways depending on the product. In petrol market choice is limited but in soap powder market a few firms Produce many differentiated products.

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