Waec Model Questions Vol1 2018 Economics Question 4

Practice objective / multiple choice question 4 from the 2018 Waec Model Questions Vol1 Economics examination.

Waec Model Questions Vol1 2018 Economics Objective / Multiple Choice Hard Difficulty
Question 4 WAEC_MODEL_QUESTIONS_VOL1 • 2018 • ECONOMICS • objective

A manufacturing firm produces widgets. Its total cost function (in ₦) is TC = 5,000,000 + 200Q - 0.02Q², where Q is output in units. The market demand for widgets is P = 500 - 0.05Q (₦ per unit). (a) Determine the output level that maximises profit and compute the maximum profit. (b) At that output, calculate the average total cost and state whether the firm should continue production in the long run if the market price is below average total cost.

Answer Options

A. Output = 5,000 units; maximum profit = -₦4,250,000 (loss); ATC = ₦900; since price (₦250) > ATC, the firm should continue production.
B. Output = 6,000 units; maximum profit = -₦5,100,000 (loss); ATC = ₦1,200; since price (₦250) < ATC, the firm should cease production.
C. Output = 4,000 units; maximum profit = -₦3,800,000 (loss); ATC = ₦1,050; since price (₦250) < ATC, the firm should cease production.
Correct Answer D. Output = 5,000 units; maximum profit = -₦4,250,000 (loss); ATC = ₦1,100; since price (₦250) < ATC, the firm should cease production.
Correct Answer
D
Correct Option:
Output = 5,000 units; maximum profit = -₦4,250,000 (loss); ATC = ₦1,100; since price (₦250) < ATC, the firm should cease production.

About This Question

This is Waec Model Questions Vol1 2018 Economics Question 4. It is one of the objective questions from the 2018 Waec Model Questions Vol1 Economics examination.

Difficulty level: Hard .

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