Gce Model Questions Vol1 2020 Economics Question 9
Practice objective / multiple choice question 9 from the 2020 Gce Model Questions Vol1 Economics examination.
A firm produces two goods, A and B, using a common fixed cost of £500,000. The marginal cost of A is \( MC_A = 2 + 0.01Q_A \) (£ per unit) and the marginal cost of B is \( MC_B = 3 + 0.02Q_B \) (£ per unit). The market price of A is £5 per unit and that of B is £7 per unit. The government offers a per‑unit subsidy of £1 on good A only. Assuming the firm can choose any non‑negative output levels for each good, determine the profit‑maximising quantities \(Q_A\) and \(Q_B\) and calculate the maximum total profit (in £). Show all steps and give the final profit to the nearest pound.
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About This Question
This is Gce Model Questions Vol1 2020 Economics Question 9. It is one of the objective questions from the 2020 Gce Model Questions Vol1 Economics examination.
Difficulty level: Hard .
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