Gce Model Questions Vol1 2023 Economics Question 5

Practice essay / theory question 5 from the 2023 Gce Model Questions Vol1 Economics examination. This question covers Cost and Revenue .

Gce Model Questions Vol1 2023 Economics Essay / Theory

Topic: Cost and Revenue

Question 5 GCE_MODEL_QUESTIONS_VOL1 • 2023 • ECONOMICS • essay

Alpha Ltd produces widgets. The firm incurs fixed costs of ₦50,000 per month. The total variable cost (TVC) is observed to be ₦20,000 when output is 100 units and ₦30,000 when output is 200 units. The market price per widget is constant at ₦500.

Question Parts

( a )

Assume the variable cost function is linear of the form TVC = aQ + b, where Q is output.

( ) Find the values of a and b.

( ) State the complete TC function.

( b )

Using the TC function obtained in (a), calculate the break‑even output (the quantity at which total revenue equals total cost). Show all steps.

( c )

If the firm decides to produce 250 units, compute total revenue, total cost and profit. Comment on whether the firm should continue production in the short run, referring to the shut‑down condition.

( d )

Suppose the government imposes a per‑unit tax of ₦100 on each widget. Explain qualitatively how this tax will affect the break‑even output and the firm's short‑run production decision.

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About This Question

This is Gce Model Questions Vol1 2023 Economics Question 5. It is one of the essay questions from the 2023 Gce Model Questions Vol1 Economics examination.

The question covers Cost and Revenue .

View More Gce Model Questions Vol1 2023 Economics Questions More Gce Model Questions Vol1 Practice Questions Back to Questions

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