WJEC · Microeconomics · Costs, revenues and profit
WJEC Economics past paper questions: Costs, revenues and profit
Every WJEC question on Costs, revenues and profit from 2017 to 2025: 4 essays, 6 data response questions, 19 short answer questions and 1 multiple choice question. It covers Market structures, Aggregate demand, Market failure, Demand, supply and elasticity and Growth and development. Each question links to its paper, mark scheme and examiner report.
SubtopicsMarket structures 2Aggregate demand 1Market failure 1Demand, supply and elasticity 1Growth and development 1
Essay questions on costs, revenues and profit
Using numerical examples relating to total and marginal product, explain the law of diminishing returns and how the law impacts on marginal costs.
Examiner insight
- What to cover
- Use a small numerical table of total and marginal product as extra labour is added to fixed capital. Show marginal product rising then falling, and link the fall directly to marginal cost rising at that output.
- Watch out
- Accurate numbers are what earn the AO1 marks here, and the higher AO3 marks come from tying the change in MC to your own figures. Vague accounts of diminishing returns scored across the lower bands.
Using examples, explain why a firm may choose objectives other than profit maximisation.
Examiner insight
- What to cover
- Explain several alternative objectives with examples: revenue maximisation, sales maximisation, satisficing, survival, market share, social and ethical goals. For each, explain why a firm would choose it over profit maximisation.
- Watch out
- The AO3 marks are in the why: the principal agent problem where managers not owners decide, a new firm building market share, appealing to different stakeholders. Missing examples blocked top band AO1.
The disadvantages of a firm choosing to profit maximise are greater than the advantages. Discuss the extent to which this statement is true.
Examiner insight
- What to cover
- Take the advantages of profit maximisation (funds for investment and dynamic efficiency, returns to shareholders, signals for resource allocation, survival) against the disadvantages (higher prices and lower output, reduced consumer welfare, short termism, pressure on workers and suppliers, regulatory risk).
- Watch out
- Weaker answers identified pros and cons but never developed the impacts or spread them across stakeholders, and gave no weighted judgement.
Explain, using diagrams, the shape of short-run and long-run average cost curves.
Examiner insight
- What to cover
- Separate the two runs. Short run: at least one fixed factor, so diminishing marginal returns set in as more labour is added to fixed capital, which pulls marginal cost up and gives the U shaped SRAC. Long run: all factors variable, so internal economies of scale pull LRAC down and diseconomies pull it back up.
- Watch out
- Do not mix the two explanations. Diminishing returns is short run, economies and diseconomies of scale are long run. Marks for AO3 depend on explaining why the curves take that shape, with marginal and average product, and on naming types of economies of scale.
Data response questions on costs, revenues and profit
State the level of daily output at which the firm is: (i) Allocatively efficient (ii) Productively efficient
Calculate the firm's total daily profit when producing a daily output of 6 units. You are advised to show your working.
The firm targets a daily output of 9 to maximise revenue. Explain, using relevant calculations, whether this is the correct level of output for this objective.
Outline the difference between accounting profit and economic profit.
Using a diagram and with reference to the data, outline the difference between internal economies of scale and internal diseconomies of scale.
Using a diagram, outline how Tesla might benefit from external economies of scale in Nevada.
Short answer questions on costs, revenues and profit
On the diagram, indicate the level of output produced by this firm.
Shade the area that represents the firm's total variable costs of production.
Explain what will happen to this firm's level of output in the long run.
Using the diagram, outline the difference between normal profit and abnormal profit.
Using the diagram, explain the law of diminishing marginal returns.
Calculate the following. You are advised to show your working. (i) Average fixed cost at the 4th unit of output. (ii) Marginal revenue for the 8th unit of output. (iii) Total variable cost when output is 2 units.
The firm's production manager has set a target of 6 units of output each day. Assuming that the firm has the objective of profit maximisation, explain whether or not the production manager has made the correct decision.
Outline why output level Q is the profit maximising level of output.
Adapt the diagram to show the change in output if the firm's variable costs increase.
The diagram below shows a profit-maximising firm operating in monopolistic competition in the short-run. Explain, with the aid of a diagram, what will happen to the level of output produced by this firm in the long-run.
At what level of output does the firm earn normal profit? Justify your answer.
At what level of output does the firm maximise its revenue? Justify your answer.
State and explain one possible social or community objective that "Bowled Over" may choose to pursue.
Identify all levels of output at which this firm makes abnormal profit.
Calculate average fixed cost when output is 5 units.
Explain two reasons why the information in the table shows a firm operating in a perfectly competitive market in the short run.
Describe the difference between normal and abnormal profit.
Adapt the diagram above to show the area representing the level of abnormal profit being made by the monopoly firm.
Using the diagram, explain why this firm is not productively efficient.
Multiple choice questions
- AS Unit 1, June 2018, Q11
A positive consumption externality occurs when:
Question text is quoted from the question papers, © WJEC CBAC Ltd, for students’ private study. Open the official papers and mark schemes from the links on each question. Examiner insights are written with AI assistance and moderated by Finn.