Context 2: Geothermal Energy Development
Extract B
Figure 2: Average rate of return on deepwater geothermal drilling projects
| Year of commissioning | Average rate of return on deepwater geothermal projects (%) |
|---|---|
| 2018 | 11.4 |
| 2019 | 10.9 |
| 2020 | 9.8 |
| 2021 | 9.1 |
| 2022 | 8.3 |
| 2023 | 7.6 |
| 2024 | 6.9 |
| 2025 (Projected) | 6.2 |
Source: International Geothermal Association Report, 2024
Note: The average rate of return is the lifetime profit an energy firm can expect to make on a deepwater geothermal project, calculated as a percentage of its initial exploration and drilling cost.
Using the data in Extract B (Figure 2), calculate the projected mean profit that a geothermal energy company would make on a new deepwater geothermal drilling project commissioned in 2025, given that the estimated average exploration and drilling cost is £1.45bn. Give your answer to the nearest million Pounds.
156 exam-style questions on AQA A Level Economics 1.4 Production, costs and revenue, covering 1.4.1 Production and productivity, 1.4.2 Specialisation, division of labour and exchange, 1.4.3 The law of diminishing returns and returns to scale (A-level only), 1.4.4 Costs of production, 1.4.5 Economies and diseconomies of scale, 1.4.6 Marginal, average and total revenue, 1.4.7 Profit, and 1.4.8 Technological change (A-level only). Each one has a worked solution and a mark scheme showing where the marks go.