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Costs and economies of scale

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Question 4

An artisanal chocolate manufacturer, CocoaCraft, currently produces 4,000 4,000\,4,000 boxes of premium chocolates per month. Its current monthly costs are:

  • Total Fixed Costs: £16,000£16,000£16,000
  • Variable Cost per box: £6.00 £6.00\,£6.00

To exploit economies of scale, CocoaCraft plans to double its monthly output to 8,000 8,000\,8,000 boxes. As a result of this expansion:

  • It secures a purchasing economy of scale, reducing its variable cost per box by 15%.
  • Its total fixed costs increase by 25% due to renting additional warehouse space.

What is the percentage change in CocoaCraft’s average total cost (ATC) per box?

A decrease of 29%29\%29%

An increase of 52%52\%52%

A decrease of 24%24\%24%

An increase of 1%1\%1%

Costs and economies of scale Questions

  1. A Level
  2. /Economics
  3. /Costs and economies of scale