Gce Model Questions Vol1 2024 Economics Question 27

Practice objective / multiple choice question 27 from the 2024 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2024 Economics Objective / Multiple Choice Medium Difficulty
Question 27 GCE_MODEL_QUESTIONS_VOL1 • 2024 • ECONOMICS • objective

A firm operates in a monopolistically competitive market. Its demand curve is \(P = 120 - 2Q\) and its total cost function is \(TC = 20Q + 0.5Q^{2}\). (a) Determine the profit‑maximising output, price and profit. (b) If the government imposes a specific tax of \(\$10\) per unit, what are the new profit‑maximising output, price and profit?

Answer Options

A. Before tax: Q=18, P=\$84, profit=\$720. After \$10/unit tax: Q=16, P=\$88, profit=\$560
B. Before tax: Q=22, P=\$76, profit=\$990. After \$10/unit tax: Q=20, P=\$80, profit=\$900
C. Before tax: Q=20, P=\$80, profit=\$1,200. After \$10/unit tax: Q=18, P=\$84, profit=\$700
Correct Answer D. Before tax: Q=20, P=\$80, profit=\$1,000. After \$10/unit tax: Q=18, P=\$84, profit=\$810
Correct Answer
D
Correct Option:
Before tax: Q=20, P=\$80, profit=\$1,000. After \$10/unit tax: Q=18, P=\$84, profit=\$810

About This Question

This is Gce Model Questions Vol1 2024 Economics Question 27. It is one of the objective questions from the 2024 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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