Gce Model Questions Vol1 2017 Economics Question 34

Practice objective / multiple choice question 34 from the 2017 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2017 Economics Objective / Multiple Choice Hard Difficulty
Question 34 GCE_MODEL_QUESTIONS_VOL1 • 2017 • ECONOMICS • objective

The total cost of producing \(Q\) units in the metal‑working industry is given by \(TC = 0.02Q^{3} - 0.3Q^{2} + 20Q + 500\) (costs in million naira). (a) Find the output level at which the long‑run average cost (LRAC) is minimised. (b) Determine the LRAC and marginal cost (MC) at that output (to two decimal places). (c) State whether the firm experiences economies of scale at that output.

Answer Options

A. Q≈30 units; LRAC≈45.20 million, MC≈45.30 million; economies of scale cease beyond this output (LRAC is rising)
Correct Answer B. Q≈26 units; LRAC≈44.95 million, MC≈44.96 million; economies of scale exist up to this output (LRAC is at its minimum)
C. Q≈26 units; LRAC≈44.00 million, MC≈44.10 million; no economies of scale at this output (LRAC flat)
D. Q≈22 units; LRAC≈46.10 million, MC≈45.90 million; economies of scale are still present at this output (LRAC decreasing)
Correct Answer
B
Correct Option:
Q≈26 units; LRAC≈44.95 million, MC≈44.96 million; economies of scale exist up to this output (LRAC is at its minimum)

About This Question

This is Gce Model Questions Vol1 2017 Economics Question 34. It is one of the objective questions from the 2017 Gce Model Questions Vol1 Economics examination.

Difficulty level: Hard .

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