Gce Model Questions Vol1 2018 Economics Question 5

A small manufacturing firm produces a single product. The table below shows its total cost (TC) and total revenue (TR) at various levels of output. | Output (units) | Total Cost (₦) | Total Revenue (₦) | |----------------|----------------|-------------------| | 0 | 20,000 | 0 | | 100 | 35,000 | 30,000 | | 200 | 48,000 | 58,000 | | 300 | 60,000 | 84,000 | | 400 | 71,000 | 108,000 | Using the data above, answer the following: a) Calculate the average cost (AC) when output is 300 units. b) Determine the marginal cost (MC) of producing the 300th unit (i.e., the change in total cost when output rises from 200 to 300 units). c) Estimate the break‑even output level – the output at which total revenue equals total cost – by linearly interpolating between the two nearest output levels in the table. d) Despite the increase in marginal cost, a firm may choose to produce above the break‑even output. Discuss two economic reasons that could justify this decision.