Grade 11 · CAPS

Grade 11 Effects of Cost and Revenue

Economics practice questions and a worked example

How a business's costs and revenue behave as it produces more -- and what that means for pricing and profit -- is the focus of this topic, built here around real perfect-market and imperfect-market cost/revenue graphs from past exam papers. The practice questions ask learners to read an actual graph (marginal cost, average cost, marginal revenue curves) and identify output, profit and price relationships from it.

Worked example

2.4 Briefly discuss any TWO objectives of a business using the SMART principle.

Answer & explanation

SMART objectives are Specific (the goal must be clearly identifiable and well defined, e.g. being the most profitable business in the country), Measurable (it must be possible to test whether the goal has been reached, e.g. an acceptable monthly profit), Agreed (all stakeholders, especially in a large business, must agree to the goal), Realistic (the goal must be achievable given the business's resources and current conditions), and Time-specific (there must be a time limit for achieving the goal, e.g. becoming the most profitable business within five years).
1. Specific: A business objective should be clear and well-defined. For example, aiming to become the most profitable business in the country is a specific goal. It helps the business focus its efforts and resources effectively. 2. Measurable: The objective should include criteria to measure progress. For instance, setting a target for an acceptable monthly profit allows the business to track its performance and determine if the goal is being met. This ensures that the objective is tangible and progress can be evaluated.

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Effects of Cost and Revenue

Question 1 of 3

1.1.3 A period during which at least one factor of production is fixed:
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More practice questions

Explore additional Grade 11 Effects of Cost and Revenue questions.

  • 2
    2.2.1 At which quantity is output maximised?
  • 3
    2.2.2 What is represented by the shaded area in the above graph?
  • 4
    2.2.3 Describe the term perfect market.
  • 5
    2.2.5 How do consumers benefit from perfect competition?

Common mistakes

  • Assuming marginal cost and average cost are the same thing, or that a firm always maximises profit at the highest price -- profit maximisation happens where marginal revenue equals marginal cost, which is not necessarily the highest price point on the graph.

More Grade 11 Economics topics

Aligned to CAPS Grade 11 Economics — Effects of Cost and Revenue. Curriculum source: CAPS for the FET Phase, Department of Basic Education.

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