Costs, revenue, objectives and markets
G3 Economics - syllabus K343, 2027
Calculate costs and revenue, explain what firms aim for, and compare competitive and monopoly markets.
- Fixed, variable and total costs
Fixed costs do not change with output, variable costs do, and total cost is the two added together.
- Calculating average costs
Average costs divide each total by output: ATC = TC / Q, AFC = FC / Q, AVC = VC / Q.
- Total revenue, average revenue and profit
Total revenue is price x quantity sold; average revenue is revenue per unit; profit is revenue minus cost.
- Objectives of firms
Firms may aim for survival, profit maximisation, growth or social welfare, and these aims can conflict.
- Competitive markets
Many firms competing keeps prices down and pushes quality and choice up, though profits are limited.
- Monopoly markets
A monopoly is a single seller protected by barriers to entry; it can charge higher prices but may fund research.
- Put it together: Choose the firm's objective
A family-owned bubble tea chain with 15 outlets is deciding its main aim for the next three years. Compare how each objective affects different groups.
What you will be able to do
I can define total, average, fixed and variable costs.
Syllabus K343, 3.6.1. Definitions of costs of production: total cost (TC), average total cost (ATC), fixed cost (FC), average fixed cost (AFC), variable cost (VC), average variable cost (AVC)
Taught in Fixed, variable and total costs, Calculating average costs
I can calculate costs of production and draw how they change with output.
Syllabus K343, 3.6.2. Calculation of costs of production: calculation of TC, ATC, FC, AFC, VC and AVC; drawing and interpretation of diagrams that show how changes in output affect costs of production
Taught in Fixed, variable and total costs, Calculating average costs
I can define total revenue and average revenue.
Syllabus K343, 3.6.3. Definition of revenue: definitions of total revenue (TR) and average revenue (AR)
I can calculate total and average revenue and explain how sales affect revenue.
Syllabus K343, 3.6.4. Calculation of revenue: calculation of TR and AR; the influence of sales on revenue
I can describe the goals of firms: survival, social welfare, profit maximisation and growth.
Syllabus K343, 3.6.5. Objectives of firms: survival, social welfare, profit maximisation and growth
Taught in Objectives of firms
I can describe competitive markets and explain how many firms affect price, quality, choice and profit.
Syllabus K343, 3.7.1. Competitive markets: characteristics, advantages and disadvantages of competitive markets; effect of having a high number of firms on price, quality, choice, profit
Taught in Competitive markets
I can describe monopoly markets and explain how one firm affects price, quality, choice and profit.
Syllabus K343, 3.7.2. Monopoly markets: characteristics, advantages and disadvantages of monopoly markets; effect of having only one firm on price, quality, choice, profit
Taught in Monopoly markets
The K343 syllabus does not require diagrams or perfect and imperfect competition theory for competitive and monopoly markets.