Waec Model Questions Vol1 2020 Economics Question 4

Practice essay / theory question 4 from the 2020 Waec Model Questions Vol1 Economics examination. This question covers Production, Cost Theory, Profit Maximisation, Short‑run Decision .

Waec Model Questions Vol1 2020 Economics Essay / Theory
Topics: Production Cost Theory Profit Maximisation Short‑run Decision
Question 4 WAEC_MODEL_QUESTIONS_VOL1 • 2020 • ECONOMICS • essay

A small‑scale agro‑processing firm produces processed cassava flour. Its short‑run total cost (STC) function is STC = ₦150,000 + ₦200Q + ₦0.5Q², where Q is the quantity of output (in tonnes) produced per month. The current market price of processed cassava flour is ₦600 per tonne.

Question Parts

( a )
Derive the short‑run marginal cost (SMC) function and compute the output level at which SMC equals the market price.
( b )
Using the output level from part (a), calculate the firm’s short‑run profit (or loss) for that month.
( c )
Explain why the firm should continue operating in the short run even if it is making a loss, referencing the concept of the shutdown point.
( d )
If the firm expects a permanent increase in market price to ₦800 per tonne, determine the new profit‑maximising output and the corresponding profit. Discuss how this change would affect the firm’s long‑run decision to expand capacity.

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About This Question

This is Waec Model Questions Vol1 2020 Economics Question 4. It is one of the essay questions from the 2020 Waec Model Questions Vol1 Economics examination.

The question covers Production, Cost Theory, Profit Maximisation, Short‑run Decision .

View More Waec Model Questions Vol1 2020 Economics Questions More Waec Model Questions Vol1 Practice Questions Back to Questions

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