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PRACTICE WORKSHEET
Subject: Economics

Name: Class: IGCSE-1

Name of the Teacher: Ms. Leena Date:

Topic: Firms’ Cost, Revenue, & Objectives-1

Answer Key
1
D is the correct answer as profit (TR - TC) is highest when the gap is greatest

 A is incorrect as this does not account for revenue

 B is incorrect as this does not account for costs
 C is incorrect as it is not about the amount of output

2
D is the correct answer as profit (TR - TC) is highest when the difference is greatest

 A is incorrect as excluding a supplier will raise costs

 B is incorrect as when average costs are equal to average revenue there is no
profit
 C is incorrect as it is not about the amount of output

3
B is the correct answer as the workers wages ($80,000) and the cost of the raw
materials ($70,000) are the variable costs

 A is incorrect as this is an incorrect calculation

 C is incorrect as this is an incorrect calculation
 D is incorrect as this is an incorrect calculation

4
D is the correct answer as variable costs must increase with any increase in output

 A is incorrect as a decrease in average cost is not guaranteed - it depends

one economies of scale
 B is incorrect as variable costs must increase which will increase total costs
 C is incorrect as the fixed costs do not change with output

5
A is the correct answer as with zero units of output, the cost level on the Y axis is the
highest (fixed costs are paid even if output is zero)

 B is incorrect as the level of costs on the Y axis is lower than in A

 C is incorrect as the level of costs on the Y axis is lower than in A
 D is incorrect as the level of fixed costs is zero

6
D is the correct answer as fixed costs are paid irrespective of output

 A is incorrect as fixed costs remain constant

 B is incorrect as the fixed costs are determined by subtracting variable costs
from total costs
 C is incorrect as this is the formula for average total cost
7
D is the correct answer as fixed costs are paid irrespective of output

 A is incorrect as fixed costs exist in both the long run and short run
 B is incorrect as theses are variable costs
 C is incorrect as they do not change with output