Gce Model Questions Vol1 2019 Economics Question 25

Practice objective / multiple choice question 25 from the 2019 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2019 Economics Objective / Multiple Choice Medium Difficulty
Question 25 GCE_MODEL_QUESTIONS_VOL1 • 2019 • ECONOMICS • objective

A company sells two products, A and B. Fixed costs are \(£150{,}000\). Variable costs per unit are \(£20\) for A and \(£30\) for B. The selling price per unit is \(£45\) for A and \(£55\) for B. The firm expects to sell \(4{,}000\) units of A and \(3{,}000\) units of B.\n\nIf the firm can raise the price of A by 10 % provided it reduces the output of B by 500 units (the price of B stays unchanged), should it make this trade‑off? Calculate the change in total profit.

Answer Options

A. Profit rises by £4,500 (new profit £29,500 versus original £25,000).
B. Profit rises by £6,800 (new profit £31,800 versus original £25,000).
Correct Answer C. Profit rises by £5,500 (new profit £30,500 versus original £25,000).
D. Profit falls by £1,200 (new profit £23,800 versus original £25,000).
Correct Answer
C
Correct Option:
Profit rises by £5,500 (new profit £30,500 versus original £25,000).

About This Question

This is Gce Model Questions Vol1 2019 Economics Question 25. It is one of the objective questions from the 2019 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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