Brightweave Textiles is a small firm that weaves scarves and sells every scarf it makes at a fixed price of $15. In one particular month, the firm sells 600 scarves. Its fixed costs for the month are $2400, and each scarf costs an additional $6 of materials and direct labour to…

Answer: ((a)) Total revenue = 15 × 600 = 9000, i.e. $9000. Average revenue = 9000 ÷ 600 = 15, i.e. $15 per scarf, equal to the price charged. ((b)) Variable cost = 6 × 600 = 3600, i.e. $3600. Total cost = 2400 + 3600 = 6000, i.e. $6000. ((c)) Profit = 9000 - 6000 = 3000, i.e. $3000. ((d)) Brightweave might instead pursue growth or survival, for example by keeping its price low to build a larger customer base or see off competitors, or it might pursue a social or ethical objective, such as paying its weavers a higher wage or using more sustainable materials, even…. Part (a): Total revenue and average revenue Total revenue is the price per scarf multiplied by the quantity sold: Total revenue = Price × Quantity = 15 × 600 = 9000 So total revenue for the month is $9000. Average revenue is total revenue…

IGCSE Economics 0455: Calculating Revenue, Cost, Profit and Firm Objectives

Part (a): Total revenue and average revenue

Total revenue is the price per scarf multiplied by the quantity sold:

$\text{Total revenue} = \text{Price} \times \text{Quantity} = 15 \times 600 = 9000$

So total revenue for the month is $9000.

Average revenue is total revenue divided by the quantity sold:

$\text{Average revenue} = \frac{9000}{600} = 15$

Average revenue is $15 per scarf. This makes sense, since Brightweave sells every scarf at the same $15 price, so the average (and only) price received per unit is simply that price.

Part (b): Total cost

The variable cost of making 600 scarves, at $6 each, is:

$\text{Variable cost} = 6 \times 600 = 3600$

Adding this to the fixed cost of $2400:

$\text{Total cost} = \text{Fixed cost} + \text{Variable cost} = 2400 + 3600 = 6000$

So the total cost of making 600 scarves this month is $6000.

Part (c): Profit

Profit is total revenue minus total cost:

$\text{Profit} = \text{Total revenue} - \text{Total cost} = 9000 - 6000 = 3000$

So Brightweave Textiles makes a profit of $3000 this month.

Part (d): A reason for not purely maximising profit

Firms do not always aim purely to maximise profit. Brightweave might instead prioritise growth or survival, for example, keeping its price at $15 (or even lower) to attract more customers and build a larger share of the scarf market over time, accepting a smaller profit now in exchange for a stronger long-term position. Alternatively, it might pursue a social or ethical objective, such as paying its weavers above the minimum needed or using more expensive, sustainably sourced yarn, both of which would raise its variable cost per scarf and lower this month’s profit below the $3000 it could otherwise achieve by cutting these costs.

Final answers

(a) Total revenue $=$ $9000; average revenue $=$ $15 per scarf.
(b) Total cost $=$ $6000.
(c) Profit $=$ $3000.
(d) A non-profit-maximising objective such as growth, survival, or a social/ethical aim can lead the firm to accept a lower profit than the maximum possible.