Gce Model Questions Vol1 2024 Economics Question 5

Practice essay / theory question 5 from the 2024 Gce Model Questions Vol1 Economics examination. This question covers Cost and Revenue, Profit Maximisation, Break‑even Analysis .

Gce Model Questions Vol1 2024 Economics Essay / Theory
Topics: Cost and Revenue Profit Maximisation Break‑even Analysis
Question 5 GCE_MODEL_QUESTIONS_VOL1 • 2024 • ECONOMICS • essay

A firm operates in the domestic market for bottled water. The market demand for the product is given by the linear equation P = 200 – 2Q, where P is the price in Naira per litre and Q is the quantity demanded in thousands of litres per month. The firm’s total cost (TC) function is TC = 50 + 5Q + 0.5Q² (all amounts are in thousands of Naira).

Question Parts

( a )
Derive the expressions for (i) marginal cost (MC) and (ii) average total cost (ATC).
( b )
Using the demand curve and the MC derived in part (a), determine the profit‑maximising output (Q*) and the corresponding price (P*). Show all steps.
( c )
Calculate the break‑even output (where total revenue equals total cost) and state the profit (or loss) the firm would make if it produced the profit‑maximising output found in part (b).
( d )
Explain qualitatively how an increase of ₦20,000 in fixed cost would affect the break‑even output and the profit at the profit‑maximising output.

Detailed Solution & Marking Scheme

Get the step-by-step solution, key points required by examiners and detailed marking guidance through the Edcrib AI Tutor.

Reveal Answer

About This Question

This is Gce Model Questions Vol1 2024 Economics Question 5. It is one of the essay questions from the 2024 Gce Model Questions Vol1 Economics examination.

The question covers Cost and Revenue, Profit Maximisation, Break‑even Analysis .

View More Gce Model Questions Vol1 2024 Economics Questions More Gce Model Questions Vol1 Practice Questions Back to Questions

Master the Exam!

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows
Chat with Support