Gce Model Questions Vol1 2024 Economics Question 6

Practice essay / theory question 6 from the 2024 Gce Model Questions Vol1 Economics examination. This question covers Market Structures, Oligopoly, Kinked‑Demand Model, Welfare Analysis .

Gce Model Questions Vol1 2024 Economics Essay / Theory
Topics: Market Structures Oligopoly Kinked‑Demand Model Welfare Analysis
Question 6 GCE_MODEL_QUESTIONS_VOL1 • 2024 • ECONOMICS • essay

The textile sector in Nigeria has recently undergone consolidation. Two of the three largest firms merged, leaving the market dominated by three firms. Prior to the merger the sector behaved like a monopolistically competitive market; after the merger it is argued to resemble an oligopoly. The prevailing market demand is P = 120 – 0.5Q (P in Naira per unit, Q in thousands of units). All firms have identical constant marginal cost of ₦30 per unit. The current market price is observed at ₦70 per unit.

Question Parts

( a )
Identify the market structure before the merger and after the merger. Justify your answer with reference to product differentiation and the number of firms.
( b )
Explain, using the kinked‑demand model, why the observed market price of ₦70 tends to remain stable even if marginal costs change.
( c )
Assuming the kinked‑demand model applies, calculate the output level that would correspond to the observed price of ₦70 if firms produced where price equals marginal cost. Comment on the plausibility of this outcome.
( d )
Discuss two policy measures the government could adopt to enhance competition in the post‑merger textile market and the likely impact of each on consumer welfare.

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About This Question

This is Gce Model Questions Vol1 2024 Economics Question 6. It is one of the essay questions from the 2024 Gce Model Questions Vol1 Economics examination.

The question covers Market Structures, Oligopoly, Kinked‑Demand Model, Welfare Analysis .

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

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