Waec Model Questions Vol1 2019 Economics Question 6

Practice essay / theory question 6 from the 2019 Waec Model Questions Vol1 Economics examination. This question covers Market Structures .

Waec Model Questions Vol1 2019 Economics Essay / Theory

Topic: Market Structures

Question 6 WAEC_MODEL_QUESTIONS_VOL1 • 2019 • ECONOMICS • essay

In a small town there are only two firms, Firm 1 and Firm 2, that produce a homogeneous product. The market demand is given by P = 100 – 2Q, where Q is the total quantity supplied to the market (Q = q1 + q2). Both firms have identical constant marginal cost of ₦20 per unit.

Question Parts

( a )

Identify the market structure that best describes this industry and justify your choice.

( b )

Assuming the firms compete à la Cournot, derive the reaction function for Firm 1 (express q1 in terms of q2).

( c )

Solve for the Cournot‑Nash equilibrium outputs of the two firms and the corresponding market price.

( d )

Compare the Cournot outcome with the socially optimal (efficient) level of output where price equals marginal cost. Discuss the welfare implications of the difference.

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About This Question

This is Waec Model Questions Vol1 2019 Economics Question 6. It is one of the essay questions from the 2019 Waec Model Questions Vol1 Economics examination.

The question covers Market Structures .

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