Gce Model Questions Vol1 2019 Economics Question 5

Practice essay / theory question 5 from the 2019 Gce Model Questions Vol1 Economics examination. This question covers Cost and Revenue .

Gce Model Questions Vol1 2019 Economics Essay / Theory

Topic: Cost and Revenue

Question 5 GCE_MODEL_QUESTIONS_VOL1 • 2019 • ECONOMICS • essay

A clothing manufacturer produces shirts. The firm’s fixed cost is ₦500,000 per month. The variable cost per shirt is constant up to 200 shirts but rises after that due to overtime wages. The following data are recorded: - At an output of 0 shirts, total cost = ₦500,000. - At an output of 100 shirts, total cost = ₦1,300,000. - At an output of 200 shirts, total cost = ₦2,100,000. - At an output of 300 shirts, total cost = ₦3,200,000. The market price of a shirt is ₦15,000. Answer the following:

Question Parts

( a )

Derive the total‑cost (TC) function for the range 0 ≤ Q ≤ 200 and for the range 200 < Q ≤ 300, stating any assumptions you make.

( b )

Using the appropriate TC function, calculate the break‑even output (the smallest whole number of shirts at which total revenue equals total cost).

( c )

The government introduces a per‑shirt tax of ₦2,000. Discuss qualitatively how this tax will affect the firm’s break‑even output and profit, and explain the economic reasoning behind your answer.

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About This Question

This is Gce Model Questions Vol1 2019 Economics Question 5. It is one of the essay questions from the 2019 Gce Model Questions Vol1 Economics examination.

The question covers Cost and Revenue .

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