A producer of metal storage cabinets is considering increasing monthly output. Its steel supplier has quoted prices for each order size, and the producer has estimated total monthly cost at each scale.
| Monthly output (cabinets) | Estimated total monthly cost | Steel ordered per month | Supplier's price for steel |
|---|---|---|---|
| 2,000 | £360,000 | 80,000 kg | £0.90 per kg |
| 5,000 | £750,000 | 200,000 kg | £0.75 per kg |
Calculate the fall in average cost per cabinet when monthly output increases from 2,000 to 5,000 cabinets.
Using the data, explain which economy of scale is shown by the change in the price of steel.
83 exam-style questions on OCR GCSE Economics 2.6 Production, covering 2.6.1 Role of producers, 2.6.2 Importance of production and productivity, 2.6.3 Calculate cost, revenue, profit and loss, 2.6.4 Explain cost, revenue, profit and loss, 2.6.5 Cost, revenue and profit for producers, and 2.6.6 Economies of scale. Each one has a worked solution and a mark scheme showing where the marks go.